* Loan growth seen weighted towards second half of year
* Banks see credit quality improving
* Dividend increases likely in 2013 capital plans
By Jochelle Mendonca and Aman Shah
Jan 17 (Reuters) - U.S. regional banks PNC Financial Services Group Inc, Fifth Third Bancorp and BB&T Corp expect their commercial and industrial loan portfolios to grow in 2013, even as competition heats up in the sector.
Commercial and industrial lending is one of the few bright spots for banks as they deal with lackluster demand for credit. Lenders are trying to outbid each other by lowering rates and sometimes extending loan terms to win business.
PNC's total commercial lending rose $3.7 billion after a weak third quarter, despite the bank saying it would pass on making some loans because the returns would be too low.
PNC Chief Executive Jim Rohr said at an investor conference last month that banks were competing on price and tenure, making some loans an unattractive proposition for the bank.
Rohr said Ohio -- a state where PNC competes with Fifth Third -- had some irrational prices.
Cincinnati-based Fifth Third's commercial and industrial loan growth also picked up pace after two quarters of muted credit growth. It expects average loans to increase in the mid-to-high single-digit range in 2013.
However, loan growth may be harder to achieve in the next two quarters as businesses remain concerned about the debt ceiling and spending cuts.
Midwestern lender Huntington Bancorp expects most of the growth in its C&I portfolio after the U.S. Congress resolves the debt ceiling issue.
ALL EYES ON CAPITAL PLANS
Large U.S. banks have submitted their capital plans to the Federal Reserve for the 2013 Comprehensive Capital Analysis and Review (CCAR). The results of the review will determine whether the banks can raise their dividends and buy back stock.
PNC CEO Rohr said it was unlikely that the bank would be allowed to buy back shares because 2013 would be a capital building year for the lender.
Fifth Third's capital plan included potential dividend increases and buybacks, Chief Executive Kevin Kabat said on a post earnings call on Thursday.
BB&T CFO Daryl Bible said a dividend increase was part of the bank's 2013 capital objectives, along with the ability to acquire other lenders. Buying back stock came in fourth on the southeastern U.S. bank's list of capital priorities.
Pittsburgh-based PNC said net income rose to $719 million, or $1.24 per share, in the quarter ended Dec. 31, from $493 million, or 85 cents per share, a year earlier.
PNC, one of the top 10 lenders in the United States, earned $254 million in mortgage banking fees, as Americans continued to refinance home loans to take advantage of low interest rates.
It set aside the same amount to cover loan repurchase requests from government-backed mortgage financiers Fannie Mae and Freddie Mac.
Fifth Third posted a higher quarterly profit on gains from its share sale in payment processor Vantiv Inc. It reported net income of $390 million, or 43 cents per share, for the quarter, above analysts' estimates of 41 cents per share.
BB&T also got a boost from mortgage banking revenue, helping it beat analysts' estimates.
PNC shares were up 3 percent at $61.76, while those of BB&T were 2 percent higher at $30.96 on the New York Stock Exchange.
Huntington Bancshares shares were up about 3 percent at $6.90, and Fifth Third shares, which rose to a four-year high earlier in the day, were up 3 percent at $16.07 on the Nasdaq.