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US Bancorp in Minneapolis reported higher profit in the third quarter, but sales fell 2.4% due to weak lending.

The bank with assets of $686 billionAverage total loans fell 1% compared to the year-ago quarter, driven by a decline in commercial loans. Declines in business loans and commercial real estate more than offset increases in credit card balances and increases in residential mortgages.

US Bancorp said its net interest income of $4.1 billion fell 2% from a year earlier. The net interest margin fell seven basis points to 2.74%.

The bank, like many of its peers, has been trying to navigate a lending landscape that has been fraught with vulnerabilities in the wake of the COVID-19 pandemic and its accelerated remote work trends.

US Bancorp’s The ratio of non-performing assets to loans and other real estate was 0.49% in the third quarter, up from 0.35% a year earlier. The increase was mainly due to higher non-performing loans in the commercial and commercial real estate sectors.

“Credit quality results were in line with expectations,” Chairman and CEO Andrew Cecere said in a news release Wednesday.

That of the nation Seventh largest bank by assets reported net income of $1.7 billion, or $1.03 per share, up from $1.5 billion, or 91 cents, a year earlier. Results included an after-tax net loss on securities of $89 million, largely offset by lower income tax expense

Net sales were $6.9 billion, down from $7 billion in the year-ago period.

Noninterest income fell 2% to $2.7 billion.

Adjusted for significant items in prior quarters, the bank reported a 1% year-over-year decline in noninterest expenses to $4.2 billion.

US Bancorp’s Big banks are finding it difficult to gain momentum, while the overall credit environment for big banks is still murky. A day before, PNC Financial Services said loan growth proved difficult to achieve in the third quarter Bank of America said his loans had increased.

“The signals regarding the return of credit demand are mixed,” said Chris Stanley, an analyst at Moody’s.

Loans at all U.S. banks rose just 1% in the four quarters ended June 30, according to S&P Global Market Intelligence.

A Board of the American Bankers Association of leading banking economists forecast that commercial and industrial loan growth would decline 0.2% this year and rise 3.3% in 2025.

Bank economists blamed high interest rates for the restrained lending this year. Throughout 2022 and last year, the Federal Reserve raised interest rates to their highest levels this century to combat inflation. The central bank’s campaign has brought inflation down from a peak of over 9% in 2022 to below 3% this year.

Following this improvement, the Fed cut its key interest rate by 50 basis points in September and signaled that further cuts could follow. Bank economists expect loan demand to increase next year as borrowing costs fall. They expect interest rates to fall by another 150 basis points by the end of 2025.

“It’s the longer-term path that is more important, and we expect the Fed’s key interest rate – which is still hawkish – to reach a more neutral level by the end of next year,” said Luke Tilley, chairman of the ABA committee and Chief economist at M&T Bank’s Wilmington Trust told reporters in September.