Bankers are cautiously upbeat about their industry. Given executives' overwhelming bias toward positive thinking, however, that is cause for concern.

A KPMG survey of top executives' outlooks has found they are lowering their expectations for revenue growth, hiring and overall economic recovery. Though still sunny, the results are at best tepid compared with those of previous surveys. Fear of regulation, meanwhile, has climbed to new peaks.

Whether those expectations prove accurate, the survey offers valuable insight into the industry's psyche and immediate plans.

"People used to say things will get better at the end of 2010," said Tony Anzevino, the leader of KPMG LLP's banking and finance practice. "They're going to be optimistic, because it's their industry and what they're passionate about. But the optimism used to be dealing with quarters. This time, it seems to be, 'It's not going to get good for a couple of years — let's be honest.' "

The results reflect the responses of 100 executives predominantly at banks with more than $1 billion of revenue. They were confident about general trends, with 70% of respondents predicting they will achieve moderate revenue growth or better in the next year, compared with 7% who foresee a decline. More than 80% reported confidence in their bank's strategy and competitive position. Despite this year's stagnant core banking growth, only 13% ranked "a lack of customer demand" among their top concerns. These results were generally in line with KPMG's 2010 study.

Few executives appeared disposed to ramp up their operations in anticipation of coming good times.

In the 2010 survey half the bankers expected to increase their head count over the course of the year — something only a quarter of this year's respondents reported they had actually done. That figure in the new polls shrank to 40%.

Similarly, the percentage of bankers that expected to make significant outlays to advertise, add branches or get into a new business shrank dramatically. Only 14% reported an intent to boost their marketing budgets.

The only categories expected to see significant growth were information technology and regulatory compliance. One possible explanation for the hesitancy appears to be fear of regulation.

A third of the executives said that regulatory issues would be the single largest issue absorbing management's attention — more than double the respondents who chose mergers and acquisitions, cost reduction, improving technology or growth. Bankers were twice as likely to cite regulatory changes (78%) as the largest obstacle to growth as the No. 2 threat (risk-management issues, at 38%).

"With regulation, I think it's the uncertainty around what it means, and its true impact is just killing them," Anzevino said. "It's the first thing that CEOs want to talk about, and it sort of weaves its way through all of the responses. Until these folks have complete clarity, good or bad, the uncertainty of it just sort of grinds everything to a halt."

Anzevino said he believes that regulatory concerns may be as much a "distraction" as a harm, with many rules likely to be more of a tax on executive attention rather than an actual line-item cost. Even taking out Basel III and Dodd-Frank Act regulations, he said, routine exams had now become much more difficult, and the extra rigor is an irritant.

KBW Inc. analyst Brian Klock seconded that idea in an email, suggesting that surveys such as KPMG's tend to be used as a forum for regulatory protest — particularly when competition for loans is keen.

Barclays PLC analyst Jason Goldberg, however, argued that the executives' obsession with regulatory matters was appropriate — particularly for large banks.

"At the end of the day, the economy is going to ebb and flow, and eventually it is going to pick up," he said. "The regulatory changes are going to be permanent."

Between credit card regulations, the Durbin amendment cap on debit interchange fees, Regulation E, and deposit insurance hikes for big banks, regulatory and legislative changes have cost the top 20 banks around $15 billion, Goldberg said.

"Then we've got to talk about derivatives and [the] Volcker [rule], and fear of what will occur after that," he said.

There is a silver lining of sorts to bankers' increasing concern over regulatory and economic effects on their business, however. Should things go wrong, KPMG's study suggests that bankers are confident it won't be their fault.

Asked whether they were more concerned about internal or external challenges to their business, the bankers chose external challenges by a margin of more than 4 to 1.