The needle didn't move much, but the uptick in commercial loan demand at U.S. Bancorp and other big lenders provides at least a thread of hope for the return of asset growth.

Average commercial loans at U.S. Bancorp increased 1% from the second quarter to the third, the first sequential-quarter gain since the end of 2008, as customers, small and midmarket businesses especially, showed a renewed willingness to borrow.

"We're seeing it across the board, slowly and just a little bit, and just about everywhere," Chairman and Chief Executive Richard Davis said Wednesday on a conference call with analysts.

His comments echoed those of executives at Bank of America Corp. and JPMorgan Chase & Co., which also reported signs of a modest pickup in commercial loan demand. The welcome news corroborated the trend spotted early on by the Federal Reserve's July survey of senior loan officers, which found that after a widespread weakening in the April survey, demand for commercial and industrial loans from companies of all sizes had stabilized.

"If you combine that with these bank earnings that show slight increases in commercial lending, that seems to be a positive sign," said Mike Lubansky, a senior financial analyst with SageWorks. His firm, which makes software for credit risk management, polled its bank clients recently and found that 57% of financial institutions plan to make "more" or "significantly more" commercial loans in 2011. Only 11% expect to make fewer commercial loans, according to the survey, which involved 159 institutions and was conducted between Sept. 28 and Oct. 18.

U.S. Bancorp executives were cautious, framing the Minneapolis company's commercial loan growth in a broader context. The commercial book remains 8.7%, or $4.4 billion, smaller than a year earlier, and the utilization of revolving credit is as weak as it has ever been. But at 26%, the credit line utilization rate was down only 1 percentage point from the second quarter. Contrast that with last year, when the rate shrunk from 35% in the second quarter to 32% in the third.

It is unclear when utilization rates will improve. The low interest rate environment has continued to entice corporate borrowers to the debt markets, making the companies less reliant on credit lines. But businesses with no alternatives in the capital markets continue to have an appetite for bank credit, as JPMorgan Chase reported last week.

"We've had an increase actually in our loan balances in the middle market, up $900 million quarter on quarter, and that's the first time in many quarters we have seen growth there," Doug Braunstein, the chief financial officer of JPMorgan Chase, said on the company's Oct. 13 conference call. "Some of that is our existing customers, much is new customers. We added almost 500 customers in the quarter in the middle market."

New customers also were important to the loan growth figures at U.S. Bancorp, which has continued to grab market share from weak competitors.

"We had been gaining share in the lending business, but that was overtaken by the fact that our utilization rates had been going down" so steeply, U.S. Bancorp's CFO, Andrew Cecere, said in an interview. "The fact that that's leveling off now while we've been gaining customers has helped us to show loan growth."

The expectation of additional market share gains is one reason why U.S. Bancorp said it refrained from releasing loan-loss reserves in the third quarter. On that front, independent analyst Nancy Bush of NAB Research called U.S. Bancorp a "standout company in the industry." She chalked up U.S. Bancorp's decision to "an innate conservatism."

The allowance for credit losses held steady from the second quarter at $5.5 billion.

In addition to the 1% increase in commercial loans versus the second quarter, U.S. Bancorp reported growth of 4% in residential mortgages, 1.6% in commercial mortgages and 1.1% in credit cards. The gains offset contractions in areas such as construction loans, pushing average total loans up 0.7%, to $192.5 billion.

"I think it does indicate at least the first signs, the first data points so to speak, of some recovery," Cecere said. "It's not a trend yet. Confidence is starting to return, but it's very early in the process."

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