Are Banks Signaling an Economic Slowdown?

It is widely accepted that the United States economy is trudging along and making a steady recovery. However, it's clear that businesses and consumers are not eager to return to a lifestyle dependent on credit and loans. U.S. Bancorp and Wells Fargo both reported weak loan demand during their first-quarter earnings releases.

Since the financial crisis, banks have been able to grow net income by cutting expenses and reducing the amount of reserves they set aside for souring loans. However, these banks can only cut their way to profitability for so long before they are forced to grown top line revenue. And with tepid demand for loans, banks are wondering if the American consumer and businessman aren't recovering quite as fast as advertised.

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David Hanson has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Citigroup and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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