Big Risks Take a Big Bite Out of Goldman’s Apple Card

Launched just two years ago as Goldman Sachs began its strategic foray into retail banking, the Apple Card recently earned the surprising accolade of approving applicants with less than stellar credit scores.

Some 28% of Goldman card customers have FICO scores below 660, according to the company’s latest financial report. reports. A score below 660 includes near-prime and subprime consumers.

See also: Goldman’s consumer banking segment sees 8% year-over-year growth

Goldman’s credit card loss rate was 2.93% in the second quarter, CNBC reported Monday, September 12, quoting a note from a JPMorgan analyst Vivek Juneja. It was not clear from the report whether the loss rate was provided for Apple Card alone or for Apple and GM Card combined.

Capital One issued 30% of its loans to people with FICO scores below 660, according to the CNBC report, while JPMorgan said 12% of its loans went to users with scores below 660. Bank of America said 3.7% of its loans were to people with scores below 620.

“Goldman has to play in a broader credit spectrum than other banks, that’s part of the problem,” a source who previously worked at Goldman Sachs told CNBC.

“They don’t have a direct-to-consumer offer yet, and when you have the Apple Card and the GM Card, you’re looking at Americana,” the source said.

Read more: Goldman Consumer Banking revenue rises 25% as loss reserves rise 497%

“People are losing their jobs and you had inflation at its highest level in 40 years; this will have more impact on the subprime cohort as they live paycheck to paycheck,” Michael Taiano, senior director at Fitch Ratings, told CNBC. “With Goldman, the question will be, did they grow too quickly in a late cycle period?”

Related: The data point: Paycheck-to-paycheck living now accounts for 59% of all US consumers

Credit cards were the biggest contributor to Goldman’s retail lending division, with 14 million customers and $16 billion in loan balances, a figure the bank said it was working to nearly double to 30 billion by 2024.

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