Fly Intel: What to watch in next round of big banks' earnings reports

Goldman Sachs (GS), Bank of America (BAC), and Morgan Stanley (MS) are scheduled to report quarterly results on July 16, 17 and 18, respectively. What to watch for: 1. OUTLOOKS: During the company's last earnings calls, Bank of America CFO Paul Donofrio said he sees seasonal headwinds in the second quarter and expects growth in NII to be consistent with general economy. The bank expects fiscal year NII to be up roughly 3% year-over-year, and net charge-offs to approximate $1B level for remaining quarters of the year. Meanwhile, Morgan Stanley said it was "confident" in the company's outlook. Last month, the bank's CEO James Gorman added that he would be "surprised" if second quarter trading revenue beat first quarter. Additionally, the bank said it was "highly confident" in reaching $4B-$5B in FICC revenue in 2019. 2. 1MDB SCANDAL: The Department of Justice is set to commence negotiations "soon" with Goldman Sachs over the firm's involvement in the 1MDB scandal, The Wall Street Journal's Aruna Viswanatha, Bradley Hope and Jenny Strasburg reported last week, citing a senior DOJ official. "We do anticipate getting into active discussions with Goldman, at this point, in the near future," Assistant Attorney General Brian Benczkowski, who runs the agency's criminal division, said in an interview. 3. DIVIDEND INCREASE, SHARE BUYBACK: Goldman Sachs announced that the Federal Reserve Board did not object to its CCAR 2019 capital plan, which includes up to $8.8B of capital return beginning in the third quarter of 2019 and ending in the second quarter of 2020. The capital plan provides for up to $7B in repurchases and $1.8B in total common stock dividends, including an increase in the bank's common stock dividend from 85c to $1.25 per share in the third quarter of 2019. Meanwhile, Bank of America also announced that the Federal Reserve did not object to its capital plan and that the company's Board of Directors approved plans to return as much as $37B to common stockholders over the next four quarters through an increased quarterly common stock dividend and common stock repurchases. The company plans to increase by 20% its quarterly common stock dividend, to 18c per share, beginning in the third quarter. It has been authorized to repurchase approximately $30.9B in common stock from July 1, 2019 through June 30, 2020. Morgan Stanley also announced that the Board of Governors of the Federal Reserve System did not object to its 2019 Capital Plan, which includes the repurchase of up to $6B outstanding common stock for the four quarters, as well as an increase in the company's quarterly common stock dividend to 35c per share from the current 30c per share. 4. RETURN POTENTIAL: Last month, BMO Capital analyst James Fotheringham upgraded Bank of America to Outperform from Market Perform, with an unchanged price target of $37. The analyst said he expects upward consensus estimates revisions and a "multiple re-rating" to drive 34% total return in the shares. Even if the Federal Reserve cuts rates, positive earnings revisions from better fees, tax rates, provisions and buybacks should "more than offset" any related net interest margin dilution, contended the analyst.