By David Henry

(Reuters] – As U.S. yields begin to rise, banks in the United States are purchasing more U.S. Treasury securities. Federal Reserve officials appear ready to cut its bond-buying program. This shift to balance sheets could help boost earnings for bankers by several percentage points.

Bank of America Corp. (NYSE:) Citigroup Inc (NYSE:), Thursday announced that they have accumulated additional net interest revenue by purchasing securities with higher yields during the fourth quarter.

JPMorgan Chase & Co (NYSE:), however, said on Wednesday that it continues to hoard cash, expecting rates to move higher as Chief Executive Jamie Dimon predicts.

Mark Mason, Chief Financial Officer at Citigroup, stated that the bank had been purchasing Treasuries as well mortgage-backed securities.

Mason stated that the company has a solid liquidity position, and that they have been using some of it to make investments.

The Federal Reserve’s purchases of bonds and government stimulus payments has fueled a surge in bank deposits. As the Fed maintained low rates and borrowers paid their loans off, net interest income from bank securities and loans has fallen, which is a major source of income.

Analysts have stated that how the largest banks manage the mix of securities and cash on their balances will determine who wins and loses in the coming quarters as there is uncertainty about the interest rate outlook and inflation.

An analyst Jason Goldberg said that the average bank could see a 7.7% rise in profits before tax and loss provisions if it invested its surplus cash at 1.5%. Barclays (LON:) estimated.

Goldberg stated that it was premature to predict if an increase in the number of securities purchased by banks signals a new trend.

Bankers face some of the most difficult challenges when it comes to managing risk and forecasting yields. Bankers who buy securities in order to get more interest right away run the risk of missing out on higher yields and ending up with less valuable securities.

With changing Fed policies and inflation views, this year’s 10-year Treasuries yield has experienced a wild ride. It fell back to 1.5% after climbing from 0.9% to 1.75% in the first three month of the year. Dimon, JPMorgan’s chief economist, predicted that the yield would rise to 3% in July. Late Thursday, the yield stood at 1.51%.

Bank stocks have risen this year due to the changing outlook of higher yields and greater lending. The KBW Bank Index has increased 39% over the past year, which is twice as much as the.

Wells Fargo (NYSE:) & Co added securities in the first half of this year, but has stepped back recently to be ready for higher rates, Chief Financial Officer Michael Santomassimo told reporters on Thursday.

Bank of America was particularly aggressive with its investments in securities. The portfolio has nearly doubled in the last year. From 22%, 36% of earnings assets were held in debt securities.

JPMorgan however, keeps its securities around 18% of its assets and has not stockpiled any cash.

JPMorgan had $757 billion cash and $565 billion securities in the third quarter.

JPMorgan’s CFO Jeremy Barnum said that the company’s position had not changed. We still believe in strong recovery. “We believe that higher rates are necessary.”

When Dimon was asked by analysts what amount of cash JPMorgan could place in securities, he replied that it would be easy to put $200 billion.

High rates and inflation are two of the biggest risks banks must be aware of, said he. We are protected by being very liquid.

Barnum stated that JPMorgan may see rates closer and the bank could find more opportunities to deploy cash.