Reports show slower growth of bad loans

 The theme of bad bank loans has echoed across earnings reports starting with JPMorgan Chase & Co., the first big bank to report third-quarter earnings last week, to Wednesday's reports from Wells Fargo & Co., U.S. Bancorp and KeyCorp. But as banks rush to trumpet their tepid signs of recovery, the piles of bad loans sitting on U.S. lenders' balance sheets continue to rise. The results show that banks are likely to face steep losses from loans for several quarters to come.

Wells Fargo, the fourth-largest U.S. bank by assets, with nearly 6,700 branches in 39 states, reported third-quarter net income of $3.2 billion and said the rate of growth in its nonperforming loans, or loans that may become uncollectible, is "slowing." But where Wells Fargo saw signs of improvement, some investors say the bank's problems are still spiking. The bank's nonperforming loans grew 27.9% during the third quarter, to $23.5 billion. During the second quarter, nonperformers at Wells grew 45.4% and its losses from Wachovia loans grew to $1.7 billion, from $984 million. Shares of Wells Fargo dropped after his comments and closed at $28.90, down 5.1%.

For most banks, the cost of covering current and future loan losses has markedly reduced earnings and, in some cases, pushed lenders to losses. Cleveland-based KeyCorp, which has 993 branches in 14 states, posted a loss of $ 397 million for the third quarter after it set aside $733 million for current and future loan losses. The bank's losses from loans tied to real estate construction projects rose faster than the second quarter, but delinquencies in that portfolio fell.

Shares of KeyCorp fell 4% to close at $6.28.

U.S. Bancorp, based in Minneapolis, posted net income of $603 million, an increase compared to the second and year-ago quarters. Shares of U.S. Bancorp, in contrast to most bank stocks, rose, closing up 2.6% at $24.43 Wednesday. The bank, which has 2,851 branches in 24 states, increased revenue from an array of businesses, including traditional banking. Its nonperforming loans and charge-offs, or permanent losses from loans, increased at a slower rate than during the second quarter. Regions Financial Corp. had been bullish about a declining rate of delinquencies, but results on Tuesday showed only a minor improvement, as deteriorating loans on multi-family properties outweighed improvements in other portfolios.