July 21 (Reuters) - Huntington Bancshares beat Wall Street estimates for second-quarter profit on Friday, as it earned more from rising interest rates and saw strong demand for its commercial loans.

Largely positive reports from big U.S. banks this week have helped restore investor confidence in the sector following the collapse of three banks in the country earlier this year.

"There is increasing optimism around a very modest slowdown, (or) recession," the bank's CEO Stephen Steinour said, citing stimulus spending from the government.

"Consumer is generally in good shape. In most of our consumer portfolios, delinquencies are actually at or better than last year at the same time."

U.S. consumers

are still keeping up with their loan payments

despite rising costs and a worsening economic outlook, according to executives at the largest U.S. lenders.

Huntington's shares were up 0.3% in afternoon trading.

A rate hike campaign by the U.S. Federal Reserve has allowed lenders to charge higher interests on loans, bolstering their net interest income (NII) - the difference between what banks earn via lending and pay out on deposits.

Huntington's NII jumped 7% to $1.35 billion, helping offset the hit from provisions for credit losses that rose 37% to $92 million in the three months ended June 30.

Total commercial loans in the quarter were $68.14 billion, up 6% from last year.

However, Columbus, Ohio-based Huntington lowered its forecast for annual NII growth, mirroring moves by some of its peers suggesting that high borrowing costs could begin to weigh on loan demand later in the year.

The bank now expects NII to increase between 3% and 5% in 2023, compared to its prior forecast of a 6% to 9% growth.

"The interest rate outlook has continued to change," said Steinour, adding there are expectations that rates will remain higher for a longer period.

"Demand is slowing in some categories, businesses are managing their working capital tighter. There's been a lot of volatility."

Comerica and Fifth Third Bancorp have also trimmed full-year NII growth forecasts.

Huntington earned $0.35 per share in the second quarter versus analysts' average estimate of $0.34 per share, according to Refinitiv IBES data.

Deposits at banks have largely stabilized after a series of bank runs earlier this year.

Total deposits at Huntington were $148 billion, up nearly 2% from the first quarter.

(Reporting by Niket Nishant in Bengaluru and Saeed Azhar in New York; Editing by Shweta Agarwal and Deepa Babington)