U.S. Bancorp eyes slow recovery, cautious on dividend

NEW YORK (Reuters) - Loan demand will remain sluggish and the economic recovery will proceed slowly, executives at US Bancorp told investors on Wednesday as they dampened hopes for a dividend increase in the near future.

US Bancorp would like to raise its dividend, a quarterly payout of 5 cents a share, but it will first digest recent global and U.S. regulatory changes and wait for regulatory approval, Chief Executive Richard Davis said.

Shares in the bank closed down 2.5 percent at $22.67, after sinking as much as 3 percent in afternoon trading, while the KBW Banks Index <.BKX> was down 0.1 percent.

"I think a lot of people were hoping that this would be an opportunity for US Bancorp to say they were going to get out of the gate sooner than others on the dividend, but that was not to be," said Matt McCormick, portfolio manager and bank analyst at Bahl & Gaynor Investment Counsel.

McCormick said the company owns some US Bancorp shares, but he is unlikely to buy more shares until he sees signs that they will raise the dividend.

SLOW RECOVERY

"We see today a very slow growth recovery," Chief Financial Officer Andy Cecere said at the investor conference in New York. The bank expects house prices to come down a further 3 to 4 percent, Cecere said.

Corporate customers also seem to have a lack of confidence in the economic environment and credit line use remains at historic lows, he added.

While the bank is seeing bad loans pile up less quickly, Davis said he is uncertain when the bank will release money it put aside against bad loans.

Sluggish loan demand will likely continue for another couple of years, Davis said, and the rate at which bad loans are charged off will come down, but remain elevated until 2013.

While the bank expects loan demand to remain low, it is focusing on expanding some new businesses and increasing the number of products it sells to existing customers, executives told investors.

US Bancorp is looking to expand its branch network and would consider buying another large bank close to the region it occupies, Davis said.

The Minneapolis-based bank, operating in 24 states, is focusing on growing in those states, Davis said.

If there is an opportunity to buy a large bank near a region where US Bancorp operates, the bank would consider a deal, he said.

"An opportunity won't be missed, but we won't make it our strategy," he said.

The bank is also expanding some of its businesses, including wealth management, according to presentations from the investor day.

(Reporting by Elinor Comlay. Editing by Robert MacMillan)