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@Revelate wrote:
@SeaProbe wrote:
@Lou-natic wrote:Yep, after reading this isn't really a "loss" like we commonly think of it. This is an "accounting trick" type of loss where they "lose" money by putting it away to cover expenses that never happened. It's just a "loss" for tax purposes really. Click bait is gonna click bait.
Considering that Goldman's consumer division is still not profitable, there is nothing to needed to lose for tax purposes. The AC is considered a sub-prime card and the only reason to do so is to enable more people to spend a lot of money on new Apple hardware.
Spend $1000+ on Apple hardware, receive an immediate 3% cash back, finance the rest on 0% APR. Apple realizes the profit, Goldman records the losses. Is there any wonder why no other bank is behind the AC? Only Goldman, who had no prior experience in the space.
App Store purchases too, if you spend money with the vast majority of apps, that's an Apple transaction too.
There's a ton of money sloshing around in the Apple ecosystem, I don't think GS is going to give up on this just yet.
I don't think GS is gonna fold up and call it a day either there's too much money at stake here to just wave the white flag. The AC reminds me a lot when Barclay's and Uber had that 4% dining card with no AF attached to it a few years back; it wasn't sustainable long term but the data mining they got I think was worth the expense they put into it. Difference here is I think GS/Apple is here to stay. Think they want to bring in customers from that Apple ecoystem and once they do then they might consider slightly nerfing benefits or attaching/creating an annual fee card so they can start recouping their investment. I know they are targeting the subprime market but need money from other sources
Am curious though as to what this means for the banking account they had intially announced. Maybe that was part of their effort to being positive in 2022 but got pushed back when the economy started in the downturn
I don't know if one considers a $1 BN loss is an accounting trick. It is a loss when cardholders don't pay their obligated debts. This is a massive (in just one quarter) for a new credit card company with about 6,500,000 card holders Est 6.4M cardholders at end of 2020 .
Yes, the major banks do have bigger numbers in their ALLL compared to GS. From CNBC.com: Citigroup's fourth-quarter profit declines
So while Citi's 4Q ALLL is almost double at $1.85 BN it has about 14 times more credit card holders (90,000,000.) U.S. credit card issuers by user count 2020 | Statista in comparison.
@Lou-natic wrote:Yep, after reading this isn't really a "loss" like we commonly think of it. This is an "accounting trick" type of loss where they "lose" money by putting it away to cover expenses that never happened. It's just a "loss" for tax purposes really. Click bait is gonna click bait.
You still aren't grasping the fact that no actual loss of over a billion dollars actually occurred.
It's an imaginary loss because they set aside over a billion dollars to cover losses that never happened. Since they couldn't "use" that money they are considering it a loss. It's like when heads of Government agencies will complain on the TV about a loss of budget when what really happened is that they didn't get a 5-10-15% increase that year. It's all mind game nonsense.
@SeaProbe wrote:
The AC is considered a sub-prime card and the only reason to do so is to enable more people to spend a lot of money on new Apple hardware.
I think labeling it as asub prime card is a bit of an oversimplification. It's not like most sub prime cards in that it can get to quite high CLs and they market it to a wider base than just sub prime. I don't have one as I don't use an iPhone, but anecdotally nearly everyone I know with the card are middle to upper middle income people without derogatories. That being said yes they do have quite a few sub prime customers and the default numbers don't lie, I just think there needs to be a some nuance to the characterization.
@Lou-natic wrote:You still aren't grasping the fact that no actual loss of over a billion dollars actually occurred.
It's an imaginary loss because they set aside over a billion dollars to cover losses that never happened. Since they couldn't "use" that money they are considering it a loss. It's like when heads of Government agencies will complain on the TV about a loss of budget when what really happened is that they didn't get a 5-10-15% increase that year. It's all mind game nonsense.
It's a FASB/GAAP phenomenon/craze. I think there's a whole industry that reviews the financials of companies and then signs off on those financials via 10-Ks and annual reports for SEC stuff.
Update on GS's latest quarter announcement..
Biggest takeawy for me from the article:
Goldman said quarterly profit plunged 66% from a year earlier to $1.33 billion, or $3.32 per share, about 39% below the consensus estimate. That made for the largest EPS miss since October 2011, according to Refinitiv data.