Goldman Sachs (GS) is scheduled to announce quarterly results on January 18, while Bank of America (BAC) and Morgan Stanley (MS) are expected to report earnings on January 19. What to watch for:
OUTLOOK: During the company's last earnings call, Bank of America said it saw fiscal 2022 net income interest "well above" fiscal 2021, and a fourth quarter tax rate between 10%-12%. Morgan Stanley also said back in October that it expected net income interest to build sequentially for remainder of year. Additionally, Morgan Stanley noted at the time that its year-to-date revenue was already 10% ahead of fiscal 2019 revenue.
MOVING TO THE SIDELINES AHEAD OF RESULTS: Earlier this month, Bank of America analyst Ebrahim Poonawala downgraded Goldman Sachs to Neutral from Buy with a price target of $475, down from $490. The analyst said that his view on the capital markets business that contributes over 70% of revenues for Goldman and a bias toward owning more interest rate sensitive stocks in the current environment tempers his outlook following the stock's strong outperformance relative to peers and the S&P over the last year. Poonawala sees limited potential for positive EPS revisions given "the Street's tendency to look past capital markets driven beats."
Meanwhile, Societe Generale analyst Andrew Lim downgraded Bank of America to Hold from Buy with a price target of $46, down from $50. Lim expects that U.S. rates will increase only modestly and that the U.S. yield curve will likely flatten, which has negative implications for Bank of America's longer-term net NII growth, the analyst told investors. The stock is also trading "expensively" and has limited upside to the firm's new price target.
SEVERAL POSITIVE TRENDS: On January 3, Barclays analyst Jason Goldberg raised the firm's price target on Morgan Stanley to $123 from $110 and keeps an Overweight rating on the shares. The analyst expects bank stocks to continue to outperform the market in 2022. While the omicron variant introduces some near-term uncertainty, the sector has "several positive trends in 2022," Goldberg told investors. He expects loan growth to accelerate and net interest margins to benefit from higher interest rates.