JPMorgan nears potential deal to run Apple Card

Daniel Acker/Bloomberg

Apple's quest to find a new home for its credit card program may be inching closer to finality.

JPMorganChase is the front-runner to secure the Apple Card portfolio, according to a report from The Wall Street Journal, which cited sources familiar with the matter.

JPMorgan, which is the largest credit card issuer in the U.S. by volume, has been eying the highly popular program since late last year. Other card issuers such as American Express and Synchrony Financial have also been reportedly vying for the portfolio, and Visa has also reportedly thrown its hat in the ring with a $100 million offer to take over payment processing from Mastercard. Amex, Visa and Mastercard all previously declined to comment.

A spokesperson for JPMorganChase declined to comment on whether they were nearing an end to discussions. Apple did not return a request for comment by publication time.

If JPMorgan is able to secure the deal, it would take Synchrony and American Express out of the running.

"This is a slight negative for Synchrony as it will take away an opportunity for loan growth in the intermediate term," KBW analyst Sanjay Sakhrani said in a research note. "Having said that, we don't believe a win for Synchrony was in the stock and the company will also be able to free up capital for repurchases on an accelerated timeline."

Apple's credit card portfolio is approximately $21 billion in receivables, according to KBW estimates, and could represent about $100 billion in payments volume, which is roughly 1% of Mastercard's volume and 75 basis points of Visa's volume.

Should Visa secure networking rights, the Apple Card portfolio would be "modestly incremental for the company," Sakhrani said. Visa made no mention of the Apple Card on yesterday's earnings call with investors.

A final selection would put an end to the high-profile, yearslong saga. Apple has been looking for a company to take over card issuing from Goldman Sachs for more than a year. The two companies have been partnered since 2019, with Goldman serving as first issuer of Apple's card program. The Apple Card served as one of Goldman's inroads to consumer lending, a business line that the investment bank has since decided to exit.

Apple's card portfolio is largely attractive due to its high spending velocity and the large concentration of affluent users, but certain nuances have given potential buyers pause.

Apple's aggressive push to get as many of its customers using the card has led to a large concentration of subprime borrowers, which has pushed down profitability on the portfolio. The portfolio is also difficult to service, because customers' billing cycle comes at the end of the month and is not staggered throughout the month.

The rumors come as some of the country's largest credit card issuers duke it out in the premium credit card space. American Express is underway with a refresh of its Platinum Card, and JPMorganChase is also refreshing its popular Sapphire card. Even Citigroup is getting into the premium card ring with the launch of its Citi Strata Elite card.