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How Investors Can Cash In on Bank Earnings

NEW YORK (TheStreet) -- The table below indicates which banks are most likely to provide an earnings surprise (upward or downward) based on prior earnings estimates versus actual earnings over the last 11 quarters since 2011.

Investors can utilize the projected fiscal year earnings estimates and price target/return calculations to either hold long-term positions on more stable bank stocks or short positions on more volatile stocks.



Of the 11 large banks to report first-quarter 2014 earnings over the next week, Bank of America (BAC), Morgan Stanley (MS) and Goldman Sachs (GS) have the most volatile estimates versus actual earnings. All three of these banks had huge quarterly variances (greater than 20%) in over half the quarters reported since 2011. The wide swings in analyst's forecasts with actual earnings give these stocks the greatest chance of an earnings surprise, either positive or negative for the first quarter.

Additionally, Citigroup (C), Capital One (COF) and Morgan Stanley (MS) had three or more missed estimated in the last 11 quarters, which makes them vulnerable to a downside surprise. JPMorgan Chase (JPM) , which reported Friday, once again missed earnings estimates. Bank of America and Citigroup had the largest downward revisions in the last 90 days.

On the opposite side, Wells Fargo (WFC), which also reported Friday, BB&T Corp. (BBT) and U.S. Bancorp (USB) have some of the smallest variance of estimates with actual earnings and are most likely to be at or near what analysts' forecasted for these banks. Also, none of these banks had swings of greater than 20% in any one quarter since 2011. PNC and Wells Fargo are the only banks in the following list that have had upward revisions in the last 90 days.

So given this information above and from the table below, which banks offer the best opportunity for investors to cash in on this quarter's earnings season?

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