For those who care about the quality of earnings, from Bloomberg:

By Daniel at 13 April, 2009, 11:41 pm

Stress-Test Results

“We do expect first-quarter earnings will be better than previous quarters, but what investors are really looking most forward to are the results of the stress tests,” said Tom Kersting, an analyst at Edward Jones & Co. in Des Peres, Missouri. “Just looking at the first-quarter results may mislead some people as far as the results of the stress test.”

One reason quarterly results may not be enough to win the confidence of investors is that the Financial Accounting Standards Board approved new rules earlier this month that make it harder to determine how much capital banks will need if the longest recession since the Great Depression deepens.

“The question is how regulators are going to deal with the kind of FASB-adjusted earnings that we’re going to see, which are going to look very rosy, but will of course be completely non-cash,” said Joseph Mason, an associate professor at Louisiana State University in Baton Rouge who previously worked at the Treasury’s Office of the Comptroller of the Currency.

FASB Rules

Changes to fair-value, or mark-to-market accounting rules approved by FASB on April 2 allow firms to use “significant” judgment in gauging prices of some investments on their books, including mortgage-backed securities. The changes, which apply to first-quarter results, could boost capital balances by 20 percent and earnings by as much as 15 percent, said Robert Willens, a former managing director at Lehman Brothers Holdings Inc., who now runs his own tax and accounting advisory firm in New York.

Banks will also be allowed to exclude from net income any losses they deem “temporary,” making it easier to provide a flattering earnings picture, said Kersting at Edward Jones.

The accounting changes probably won’t offset loan charge- offs that are growing so quickly “that by the end of the year all the top-line revenue will be eaten up by credit costs,” according to Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.