Regional bank profits will improve substantially in the next 18 months, then grow more slowly through 1983, predicts Wheat, First Securities, the Richmond based brokerage house.

Reviewing banking trends in the states it serves - Virginia, West Virginia and North Carolina - Wheat, First's analysis said aggregate earnings for 15 regional banks would grow 13.5 per cent this year and another 11 per cent in 1978.

But the five-year-outlook is for generally slower growth in the 8 per cent range, because of on-going changes in banking business.

Virginia banks' earnings will generally parallel the regional trend through 1978, said T. Michael Smith, the financial analyst who produced the study. Over the next five years, most Virginia banks, particularly those in the Washington suburbs, will match the overall trend, and some will do significantly better, he added.

Wheat, First said its index of 15 banks showed that since the first of the year, savings deposits have increased 5.9 per cent, consumer installment loans grew 7.6 per cent and real estate loans gained 8.7 per cent.

Bank earnings, the report noted, have been hurt in recent years by unprofitable real estate loans that tied up other bank assets in reserves for loan losses. Reserves for loan losses increased during 1976 by about 2 per cent, but will drop by 16 per cent this year, then probably trend upward in 1978, it was predicted.

"The expansion of consumer credit should continue, although perhaps at a more modest pace," for the remainder of this year and into 1978. On the commercial side, the research study predicts "an acceleration in loan demand in the second half of 1977 and into 1978."

The Wheat, First analyst noted that both retail banking and commercial lending are in the midst of changes that cast unertainties over the future of regional banks.

Large corporate borrowers who have traditionally been the main commercial customers are becoming less important as they rely more heavily on internal financing.

"By far the greatest user of regional bank funds will be the middle market company that has limited access to alternative sources of funds," the report said.