(Updates to focus on economic outlook, adds CFO comments)

NEW YORK (Reuters) - Executives at US Bancorp, thefifth largest U.S. bank by assets, told investors Wednesdaythat they expect loan demand to remain sluggish and theeconomic recovery to proceed slowly.

Shares in the bank sank 3 percent in afternoon trading,while the KBW Banks Index was down less than 0.1percent.

"We see today a very slow growth recovery," Andy Cecere,chief financial officer, said at an investor conference in NewYork. The bank expects house prices to come down a further 3 to4 percent, Cecere said. Corporate customers also seem to have alack of confidence in the economic environment and credit lineuse remains at historic lows, he added.

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

The global and U.S. financial reforms are "manageable," butthe bank will wait for regulatory approval before increasingits dividend, Davis said.

The bank hopes to return most of its profits toshareholders, and increasing its quarterly 5-cents-a-sharepayout is a priority, Davis said.

US Bancorp shares were down 71 cents or 3 percent at $22.55in afternoon trading.

EXPANSION PLANS

While the bank expects loan demand to remain sluggish, itis focusing on expanding some new businesses and increasing thenumber of products it sells to existing customers, executivestold investors.

US Bancorp is looking to expand its branch networkand would consider buying another large bank close to theregion it occupies, Davis said.

The Minneapolis-based bank, operating in 24 states, isfocusing on growing in those states, Davis said at the bank'sinvestor day in New York.

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

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

The bank is also expanding some of its businesses,including wealth management, according to presentations fromthe investor day. (Reporting by Elinor Comlay. Editing by Robert MacMillan)