Tax cuts, deregulation and a brisk economy have always led to higher profits in most US banks during the last quarter.

But an urgent question depends on the industry: would banks, which rely on increasing economic optimism and a friendlier White House, increase their lending to businesses and households significantly?

On Friday, reports from four of the United States largest banks showed little sign of such a revival. JPMorgan Chase, Citigroup and PNC announced another quarter of healthy gains, most of which would end up in the pockets of shareholders. Wells Fargo, which operated after a series of scandals due to regulatory restrictions, reported a decline in profits.

Overall, lending to the four banks grew by 2.1 percent year-on-year in the second quarter, according to a New York Times analysis. This represents a slowdown from the 3 percent increase in the first quarter. It is also well below the 4.6 percent credit growth reached by the four banks throughout 2016, the last full year of the Obama administration.

The Trump administration has claimed that many of the regulations introduced after the financial crisis a decade ago make banks stronger have slowed down lending and burdened the economy as a whole. However, according to the Federal Reserve, annual credit growth for the entire banking sector in the last two years of the Obama administration has been stronger.

A revival of lending, which could help more people buy homes and businesses, could still happen.

Loose regulations and the robust economy can take some time to get more credit. Tax cuts have increased companies' cash flows and possibly reduced short-term credit demand. Higher interest rates can also deter borrowers. And the banks may hold back because they do not want to lend out loans with a higher default probability.

Nevertheless, the banks have plenty of surplus cash that they could use now to get higher loans if they wanted to. Instead, they have decided to make large payments to shareholders in the form of dividends and share repurchases. After passing the Federal Reserve's stress tests last month, the four banks that posted results Friday had announced plans to distribute nearly $ 90 billion to shareholders.

"If we sit here today, I would call demand solid, decent – that's not what it was two years ago," said Marianne Lake, JPMorgan Chase's chief financial officer, during a conference call with journalists. She said construction loan growth had slowed down in part as companies used cash from their tax cuts to expand rather than raise more loans.

JPMorgan, the largest bank in the country, posted the fastest credit growth among the four banks. JPMorgan's total loans rose 4.4 percent. In the second quarter, JPMorgan's earnings per share increased 26 percent year-on-year.

Wall Street analysts expected Citigroup, the country's third-largest bank, to show slightly more revenue than in the quarter. The difference was less than $ 100 million, but the shortfall caused Citi's stock to fall on Friday. Citi's loans grew 4 percent year-over-year, well below the 7 percent increase in the first quarter of this year. Adjusted for exchange-rate effects, Citi's loans increased 5 percent year-on-year in the second quarter, the Bank noted in its earnings release. Loans to corporates increased 8 percent in the second quarter.

Wells Fargo loans declined 1.4 percent in the second quarter. Analysts have not expected strong growth at Wells Fargo earlier this year, according to the Federal Reserve demanded that the bank limit the growth of its balance sheet while correcting the issues that led to a series of scandals.

But last month, Wells Fargo's CFO John Shrewsberry said the cap was not a significant factor. "It's not a barrier to organic credit growth," he said.

Wells Fargo's loans to commercial real estate buyers, such as office buildings and shopping centers, fell $ 2.5 billion in the second quarter.

Bank chief Timothy J. Sloan told analysts Friday that the bank did not want to compete for such loans by relaxing its terms. "We see a deterioration in underwriting standards," he said.

The recent slowdown in credit growth is not necessarily a bad thing. Some borrowers, especially large companies, have been borrowing freely for years. And new regulations kept banks from granting loans that borrowers find difficult to repay. The fact that the economy is expanding without a huge debt hike is probably one reason why the current recovery has taken so long.


An earlier version of this article misrepresented when the Bank of the Ozarks published its Q2 results. It was Wednesday, not Friday.


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