NEW YORK (Reuters) - Loan demand will remainsluggish and the economic recovery will proceed slowly,executives at US Bancorp told investors Wednesday as theydampened hopes for a dividend increase in the near future.

US Bancorp would like to raise its dividend, a quarterlypayout of 5 cents a share, but it will first digest recentglobal and U.S. regulatory changes and wait for regulatoryapproval, Chief Executive Richard Davis said.

Shares in the bank closed down 2.5 percent at $22.67, aftersinking as much as 3 percent in afternoon trading, while theKBW Banks Index was down 0.1 percent.

"I think a lot of people were hoping that this would be anopportunity for US Bancorp to say they were going to get out ofthe gate sooner than others on the dividend, but that was notto be," said Matt McCormick, portfolio manager and bank analystat Bahl & Gaynor Investment Counsel.

McCormick said the company owns some US Bancorp shares, buthe is unlikely to buy more shares until he sees signs that theywill raise the dividend.

SLOW RECOVERY

"We see today a very slow growth recovery," Chief FinancialOfficer Andy Cecere said at the 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 a lack of confidencein the economic environment and credit line use remains athistoric lows, he added.

While the bank is seeing bad loans pile up less quickly,Davis said he is uncertain when the bank will release money itput aside against bad loans.

Sluggish loan demand will likely continue for anothercouple of years, Davis said, and the rate at which bad loansare charged off will come down, but remain elevated until2013.

While the bank expects loan demand to remain low, it isfocusing 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.

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)