Goldman Sachs spending heavily in preparation for Apple Card

Traditionally not a consumer-facing company, Goldman Sachs has been slowly transitioning towards more public-friendly offerings. Apple Card is one of the initiatives it is pursuing as part of the change, but the shift to consumer-oriented services has been expensive for the company.

According to second-quarter earnings released on Tuesday, CNBC reports Goldman Sachs has spent in the region of $1.3 billion on its consumer services, including Apple Card, the Marcus savings accounts, and other initiatives. For 2019 so far, $275 million has been spent, which has resulted in a 0.6% reduction of Goldman's equity return.

It was not revealed how much of the totals were spent on Apple Card specifically, but the endeavor is going to be costly to the company either way. CFO Stephen Scherr advised it slowed the rate of Marcus loan growth to prepare for the demand of Apple Card, which will be arriving this summer in the United States.

There will also be a "meaningful impact" of Goldman's reserve build to support the initial growth of Apple Card, with the bank expecting to give a "strategic update" to investors in January, along with new targets and return profiles for Apple Card and Marcus at that time.

"There's no denying the consumer business - whether Apple Card or Marcus - is a risk business," Scherr admitted. "We'll continue to look at it on a risk-adjusted return basis."

While Goldman Sachs is bearing the risk, Apple could end up earning "almost pure profit" from the venture according to analysts. In May, it was suggested Apple Card could earn Apple $1 billion dollars in revenue within a few years of its launch.

In an interview in June, head of Goldman's Marcus division Omer Ismail fought concerns the structure of Apple Card to consumers isn't produced for maximum profitability by implying customer loyalty and engagement may be more important. "The idea that doing right by the customer means being less profitable is just not an idea we subscribe to," Ismail said. "If you do right by the customer, you're going to ultimately win their loyalty."