Goldman Sachs is on the cusp of clinching a deal to buy General Motors Co.’s credit-card business for about $2.5 billion, in a move that would boost its consumer banking presence, the Wall Street Journal reported.
According to the report, Goldman (GS) won the bidding over Barclays PLC, handing the Wall Street firm more than 1 million GM cardholders and their roughly $8.5 billion in annual spending.
The deal comes after Goldman last year rolled out its first credit card with Apple and is on the hunt for other deals in co-branded cards. Meanwhile, banks have been deferring payments for millions of cardholders facing financial hardship from the coronavirus pandemic, and have set aside billions of dollars to cover potential losses if the debt doesn’t get paid back.
The Wall Street Journal reported in August that Goldman and Barclays were rival bidders for the card, which has roughly $2.5 billion in outstanding balances but comes with a brand-name partner in GM (GM) and opportunities to embed payments in cars.
Goldman and Capital One Financial Corp., which has issued GM’s card since 2012, have agreed on the outline of a deal, including the purchase price, according to the report. They expect to finalize it in the coming weeks if it doesn’t fall apart. Goldman is likely to pay a slight premium for the debt and hope to make up any future losses by selling GM cardholders on its own products, which include online savings accounts, personal loans and investment products, it was added in the report.
Merrill Lynch analyst Michael Carrier this week reiterated a Buy rating on GS with a $240 price target (21% upside potential) and added the stock to the firm’s US 1 List, as he expects multiple factors to drive improving return on equity and stock upside.
“We view GS as attractive given a favorable near term revenue backdrop, strategic initiatives in place to drive additional revenue growth ahead, a management team focused on improving its efficiency ratio and capital needs, and a stock trading below tangible book value,” Carrier wrote in a note to investors.
Overall Wall Street analysts have a Moderate Buy consensus to the bank’s stock based on 10 Buys and 5 Holds. The $248.14 average price target sees investors making a potential 25% profit on the shares in the next 12 months. (See Goldman Sachs stock analysis on TipRanks)
Related News:
Google To Pay Media Outlets $1B For News Content
PepsiCo To Beat Annual Profit Bets As Pandemic Fuels Demand For Snacks
Datadog Spikes 12% On Partnership With Microsoft Azure; Stock Up 171% YTD
