NEW YORK ( TheStreet) -- Citigroup ( C) and Bank of America ( BAC) shares were higher in early trading Wednesday, despite a front-page report in The Wall Street Journal that said those banks, along with Deutsche Bank ( DB), "were among the most active" at temporarily reducing debt levels before the end of the quarter, obscuring some of the risks on their balance sheets.

Nearly all large U.S. banks opened higher Wednesday, but Citigroup and Bank of America were among the highest. Bank of America shares were up 2.45% 10 minutes before the open, and Citigroup was up 4.76%. An upgrade from Oppenheimer may also have contributed to the momentum in Citigroup shares. Goldman Sachs ( GS), JPMorgan Chase ( JPM) and Morgan Stanley ( MS) were all up by a smaller margin even though the Journal's report stated that those banks have not regularly cut short-term borrowing ahead of the end of each quarter. Deutsche Bank shares, which like other European banks have been hit hard in recent weeks due to the debt crisis in that region of the world, were down slightly.

Citigroup may have gotten a lift from a report in the Financial Times that said that the Qatar Investment Authority is considering buying some of the U.S. Treasury Department's 27% stake in Citigroup. Also, because Citigroup and Bank of America saw their shares sell off more steeply than other large banks during the crisis, their shares generally jump highest when the market is in rally mode, as it was early Wednesday.
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Drawing on Federal Reserve data, the newspaper reported that the three banks reduced borrowing in the repurchase market by an average of 41% over 10 quarters. The repurchase or "repo" market, where banks put up securities as collateral to get quick access to funds, is one of the riskiest types of borrowing because it is so short term. If investors begin to panic and markets seize up, banks that rely too heavily on this market can suddenly find themselves in a funding crisis, as occurred with Bear Stearns and Lehman Brothers during the 2008 crisis.

Reducing short-term borrowing ahead of the end of a quarter does not appear to be illegal, though the Securities and Exchange Commission is considering new rules that would require increased disclosure of such practices, according to the Journal report.

-- Written by Dan Freed in New York.

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