Goldman’s credit card business, based on Apple Card since 2019, may have been the company’s biggest success in terms of scaling up retail lending. It is the largest depositor of the unit’s 14 million customers and $16 billion in loans, a figure that Goldman says will nearly double to $30 billion by 2024. But growing losses threaten to spoil this picture. CNBC: Lenders consider bad loans “written off” after a customer has missed payments for six months; Goldman’s net charge-off rate of 2.93% is double the 1.47% rate at JPMorgan’s card business and higher than Bank of America’s 1.60%, despite being part of those issuers. Goldman’s losses are also higher than those of Capital One, the biggest subprime player among the big banks, which had a charge-off rate of 2.26%. “If there’s one thing Goldman should be good at, it’s risk management,” said Jason Mikula, a former Goldman employee who now advises the industry. “So how do their foreclosure rates compare to the subprime portfolio?” The biggest reason is that Goldman clients have been with the bank for an average of less than two years, according to people with knowledge of the business who were not authorized to speak to the press.

Chargeback rates tend to be highest during the first few years of card use; As Goldman’s client base ages and struggling users drop out, those losses should moderate, the people said. The bank relies on third-party data providers to benchmark against similar cards of the same vintage, and its performance has been satisfactory, the people said. Other banks also tend to be more aggressive in their pursuit of debt collection, which improves the net collection performance of rivals, the people said. But another factor is that Goldman’s biggest credit product, the Apple Card, targets a wide swath of the country, including those with poor credit scores. At the start of its rollout, some users were stunned to learn they had been approved for the card despite their checkered credit history. “Goldman has to play a wider range of loans than other banks, that’s part of the problem,” said a person who once worked at the New York bank, who spoke on condition of anonymity to speak candidly about his former employer. “They don’t have any consumer offers yet, and if you have an Apple Card and GM, you’re looking at Americana.”

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