Regional banks are bullish on demand for business loans, but they are not so optimistic about their prospects for revenue growth.

In conference calls discussing first-quarter results, executives at Fifth Third Bancorp (FITB), BB&T (BBT) and KeyCorp (KEY) all predicted that commercial lending would grow at a modest clip this year, as businesses that had been hoarding cash start investing in growth.

But banks remain concerned about their ability to meaningfully grow revenue at a time when yields on those loans are narrowing and income from mortgage banking — a key revenue driver — continues to shrink. The end of the refinancing boom has taken a toll on banks' mortgage income and replacing that lost income is arguably regional banks' biggest challenge.

"Revenue is relatively slow and is probably going to be somewhat slow as mortgage continues to be down," Kelly King, BB&T's chairman and chief executive, said during a conference call with analysts Thursday.

It's not what investors want to hear. The Winston-Salem, N.C., company's shares tumbled 3.6% Thursday, to close at $37.93. Fifth Third's fell 4.1%, to $20.95. Key's shares rose less than 0.4%, to $13.56.

To be sure, the banks are eager to find new revenue streams. Fifth Third, of Cincinnati, has bulked up in a number of new sectors, including health care and international trade. BB&T recently launched a national commercial real estate business, and Key is actively expanding its credit and debit card business lines.

But it takes time for such investments really to pay off and, in for now, banks must continue to pull multiple levers to try to meet investor expectations. Indeed, King said cutting costs remains one of BB&T's top priorities.

"We are laser focused on expense management as we continue to reconceptualize our businesses," King said.

BB&T expects total loans to rise by 3% to 5% in the second quarter, largely due to commercial lending, which "seems to have really good legs," King said.

Still, shrinking margins will erode some of the returns. BB&T said its margin, which compressed by 4 basis points in the first quarter, will likely shrink by another 10 basis points in the current quarter.

BB&T's profit more than doubled that of a year earlier, to $501 million. Last year's results were reduced by a $281 million tax-related adjustment.

BB&T is disinclined to pursue acquisitions for now, as it takes a disciplined approach to capital in light of recent stress testing. BB&T passed this year but had its dividend and repurchase plan rejected by the Federal Reserve Board in 2013. "We will be conservative, as you know, with capital," he said.

Banks with strong capital and do not pose any systemic risk will have opportunities to consolidate as the Fed gets more comfortable with stress testing, King said. (BB&T is set to complete its purchase of 21 Texas branches from Citigroup by June 30.)

M&A "is a good, healthy long-term thing for BB&T because we are really good at it," King said. "We'll keep looking. It's not out of the question for the long term."

Ongoing contraction in the mortgage business pinched Fifth Third, and CEO Kevin Kabat doesn't expect any near-term improvement. Fifth Third also charged off loans from several big accounts for the second straight quarter.

The $129 billion-asset company cut its 2014 outlook for noninterest income, saying it will decline by mid- to high-single-digit percentage points. Most of the decline is tied to its mortgage business, which had a worse-than-usual first quarter.

"Our outlook wasn't great to begin with and we saw a rather severe first quarter," Kabat said in an interview. "Part of that is cyclicality. Not many people move in the January-to-March timeline and we had a deeper trough than anticipated."

Fifth Third also exited the wholesale loan-purchase business in March by ending some mortgage-broker agreements, which Kabat said further cut into mortgage revenue. (He said that exit was already baked into the noninterest income estimates.)

There is little reason to believe mortgage revenues will rebound until broader economic conditions improve. "Until employment and appreciation [in home values] become really kind of more robust, you're not going to see" a pick-up, Kabat said.

Fifth Third's profit fell 25% from a year earlier, to $309 million. Credit quality issues also resurfaced; the company charged off about $60 million tied to three big commercial loans. Net chargeoffs rose 26% from a year earlier, to $168 million.

"They're a bit in the penalty box right now," says Sameer Gokhale, an analyst at Janney Montgomery Scott. "They need to demonstrate that credit isn't coming apart at the seams."

Excluding the big credits, credit quality is improving, Tayfun Tuzun, Fifth Third's chief financial officer, said during a conference call. He said nonperforming assets should decline 15% this year compared to 2013.

Banking still has a fair share of optimists, including KeyCorp in Cleveland, which forecast that average loan growth would be in the mid-single-digit range in 2014. Average total loans rose 4% in the first quarter from a year earlier as commercial lending surged by nearly 9%. The growth included improvements in areas like multifamily lending and leasing.

Much of the improvement was driven by loan demand from its larger middle-market clients, Beth Mooney, the $90.8 billion-asset company's chairman and CEO, said during a conference call.

Midsize firms are "more likely to be incurring leverage to acquire companies because we see a trend towards growth through strategic acquisitions and organic investment," she said.

"We've seen some signs of borrowing to do share purchases," she added. "At the smaller end of the market, we see growth but it is not as strong as it is among our upper end, middle-market and corporate clients."

KeyCorp's profit rose 18% from a year earlier, to $236 million, though it also struggled with revenue, which fell slightly.

Management cut noninterest expenses by 3%. Analysts were pleased with the cuts, yet they pressed Mooney about reducing expenses further. A focus on commercial banking, investment banking and debt placement, rather than high-yielding consumer businesses requires a higher efficiency ratio, Mooney said.

"This revenue environment of low interest rates is clearly pressuring the efficiency and productivity of our industry," she said. "I'm pleased with our progress but am never satisfied. We will continue to show progress."

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