Awesome, all the banks are showing a profit this quarter.

Even beleaguered Citigroup (C) managed to report a profit, while managing to post negative EPS, which is unusual.

So how'd they actually do it? Part of it was trading profits. All the banks have had an awesome quarter in this respect, even as other core businesses have continued to deteriorate.

And part of it is just plain old creative accounting.

This Bloomberg piece explains:

“It’s very hard for me to foresee that one quarterly earnings report, or one announcement by Vikram Pandit that they are more profitable than they’ve been since the third quarter of ‘07, means all past things are forgiven,” said Douglas Ciocca, a portfolio manager at Renaissance Financial Corp. in Leawood, Kansas. “There has to be demonstration of traction.”

Citigroup posted a $2.5 billion gain because of an accounting change adopted in 2007. Under the rule, companies are allowed to record any declines in the market value of their own debt as an unrealized gain.

In other words, because Citi's debt is trading at distressed levels, the company could, theoretically, book some balance sheet gains by buying it back -- reducing liabilities by more than it costs to retire that debt. Of course, they haven't done that yet. But they could!

And then there's just portfolio shuffling. The company has moved assets, which might otherwise have to be written down, into its "helt ot maturity" portfolio, which means it doesn't have to mark those assets to market. Again, within the rules, but no fundamental improvement.