While US Bancorp's quarterly results beat Wall Street estimates, PNC missed, and its shares were off more than 2 percent. Both banks set aside reserves related to long-running government investigations of mortgage foreclosure abuses.

The banks showed loan growth and improving credit quality in the quarter. PNC's loans increased 2.9 percent from the third quarter to $159 billion, while US Bancorp's grew 2.5 percent to $209.8 billion. Both cited strength in commercial loans.

Wells Fargo & Co (WFC.N) and JPMorgan Chase & Co (JPM.N) also showed promising signs of loan growth in their fourth-quarter earnings reports.

"Loan growth and the economy go hand in hand," said Raymond James analyst Anthony Polini. "So there are signs it's getting better, and that goes with the data we're seeing from the Federal Reserve. On the whole, commercial loan growth has surprised on the upside this quarter and that's a good sign."

US Bancorp's higher profit and steady outlook from business and consumer lending contrasted sharply with the 56 percent profit drop announced at the same time by Goldman Sachs Group Inc. (GS.N) Goldman, with operations concentrated in trading and investment banking, lost business as clients fearfully backed away from dealmaking in markets made volatile by the European debt crisis.

Wells Fargo & Co, another bank light on investment banking, on Tuesday also beat estimates with higher profits helped by loan growth and improving credit quality. Bank of America Corp (BAC.N) and Morgan Stanley (MS.N) disclose their results on Thursday.

PNC and US Bancorp took expenses related to mortgage-servicing matters, a sign lenders beyond the five largest mortgage servicers may join a possible settlement related to foreclosure abuses.

Several top U.S. banks are expected to sign a $20 billion to $25 billion agreement with the government in the coming weeks to resolve allegations of mortgage abuses. The Justice Department began reaching out to several other banks to gauge their interest in joining the settlement, people familiar with the matter told Reuters earlier this month, a move that could increase the total price tag of the deal.

PNC recorded $240 million in foreclosure-related expenses as a result of "ongoing governmental matters," while US Bancorp took a $130 million charge due to mortgage-servicing matters.

PNC Chief Executive Jim Rohr in a conference call with analysts said the bank had recently been contacted by "additional regulators who gave us some information that we believed that we needed to accrue for in the fourth quarter."

U.S. Bancorp CEO Richard Davis said it was "accurate that banks beyond the big five have been invited into the conversations, and for that we believe we have something that we need to reserve for." The fact that the bank was setting aside reserves did not necessarily mean a final decision had been made or that a final amount had been determined, Davis said.

PNC MISSES ANALYSTS' ESTIMATES

Pittsburgh-based PNC said net income applicable to common shareholders fell to $451 million, or 85 cents per share, from $798 million, or $1.50 per share, a year earlier.

Excluding certain items, PNC earned $1.15 per share, missing analysts' average estimate of $1.41, according to Thomson Reuters I/B/E/S.

The bank's results were diminished by the $240 million mortgage-related expense, a noncash charge of $198 million related to the redemption of trust preferred securities and a $103 million increase in personnel expenses related to compensation.

On the positive side, the bank's surge in loans during the quarter was "across the board," CEO Rohr said in a conference call with analysts.

"I think that actually is the reason we are a little bullish on loan growth going into (2012) because it wasn't one segment, it wasn't one market or one region," he said.

US Bancorp, based in Minneapolis, said net income rose nearly 40 percent as it made more money from its core banking business. Net income applicable to common shareholders was $1.3 billion, or 69 cents per share, up from $951 million, or 49 cents per share, a year earlier.

US Bancorp's earnings before special items came to 64 cents per share, beating analysts' average estimate by a penny. US Bancorp shares were little changed.

The bank's increase in loans was "broad-based geographically and by size of business," Chief Financial Officer Andrew Cecere said in an interview. But anything related to housing is "certainly not growing," he said.

CEO Davis said the bank will continue to build loans in 2012, but at a slower pace than in the fourth quarter. "I think the fact that there is loan growth at all says that the economy is doing pretty well," he said in the conference call with analysts.

But executives of both banks cautioned that their additional commercial loans are not entirely evidence of higher confidence and demand for money from businesses. Both said they were taking market share away from other banks and that the utilization of credit lines remained flat.

In a research note, analyst Christopher Mutascio of Stifel Nicolaus & Co said investors may be getting too optimistic about loan growth, citing Davis' comments about slower growth.

"We think total loan growth and commercial loan growth are likely to slow in 2012 from the quarterly levels experienced in the back half of 2011," he wrote. Some of the growth may have come from businesses out to finance capital expenditures before certain tax incentives for business investment expire, he said.

JPMorgan Chase & Co on Friday said loan balances in the company's commercial banking division were up 13 percent at the end of December from a year earlier. Chief Executive Jamie Dimon conceded that some of JPMorgan's new loans came from taking business from competitors. But Dimon said business demand for money is up and making him more optimistic about the economy.

Credit quality improved in the fourth quarter for US Bancorp, which has emerged as one of the strongest U.S. regional lenders in the wake of the 2008 financial crisis. Provisions for credit losses fell by nearly half, to $497 million.

PNC's provisions to cover credit losses declined 57 percent to $190 million.

(Reporting by David Henry in New York,; Rick Rothacker in Charlotte, North Carolina,; Aman Shah and Jochelle Mendonca in Bangalore, Aruna Viswanatha in Washington; Editing by Lisa Von Ahn and Mark Porter)