–Firms Say Business Volumes At Strongest Since Start Of Crisis
–Finance Firms Say Business Now Only Slightly Below Normal
–Profitability At Its Highest Since December 1993

LONDON (MNI) – UK financial services saw a third straight quarter
of strong activity growth, according to the latest
CBI/PricewaterhouseCooper’s latest financial sectors survey showed
strong growth activity for the third straight quarter.

Firms reported that their level of business was only slightly below
normal and at the strongest level since the start of the financial
crisis in September 2007, the CBI/PwC added.

The volumes of business grew in all sub-sectors – apart from
banking and finance houses. Banking sector volumes were flat and finance
house volumes fell. Building societies, life insurance, general
insurance, insurance brokers, investment management and securities
trading all saw growth in the volumes of their business.

A balance of 22% of business surveyed reported growth in their
volumes (33% said volumes increased while 11% said they decreased).

Profitability was higher over the past quarter and is at its
highest level since December 1993, advancing to 62%.

Companies are also looking ahead over the next 12 months and plan
to invest in land, buildings and IT. Investment plans for marketing have
seen their biggest climb since December 1993.

Firms also brought down the value of their non-performing loans at
the fastest rate since December 1996, to -38%.

Volumes for businesses with private individuals rose to highs on
December 1996, growing to 62%.

The value of fee, commission and premium income as well as the
volume of income from net interest, net investment and trading advanced
to new highs since March 2007. They rose to 21% and 10%, respectively.

Total operating costs gained for the second consecutive time after
two years of falls, rising to 19%. Average spreads narrowed at the
quickest pace since June 2007, falling to -27%.

The banking sector didn’t see change in business volumes in the
last quarter and reported that volumes were normal. This comes after
three years of volumes below normal levels. Profitability of banks has
increased dramatically to 91% after falling to -31% in Q4 2010.

Andrew Gray, UK banking leader at PriceWaterhouseCoopers, said in a
press conference that the volume of business in banks “is not going to
be as high as it was three or four years ago. They’re experiencing
increasing costs in a number of different directions – interest on
capital, lower profitability of their new business…And they’re also
looking at efficiency in a way they might not have done before.”

He also added: “One of the things that the banks have had, is a
great deal of uncertainty in terms of where the economy is going; where
the volume of business is going; the way in which the regulators are
going to treat them. And whilst the latter point is probably the one
with the greatest uncertainty, they’re more confident about the way the
economic climate is going to turn out, and whether it’s going to improve
in 6 months, 9 months – the timing is obviously going to be a difficult
one.”

“But I think it does feel like there’s greater stability and
predictability in terms of what the demand for financial services or
banking services will look like going forwards.”

“I think it’s a general sense both in terms of across the products
they offer, that there’s a confidence in what the overall demand is and
they’re [banks] adjusting their business models accordingly.”

Ian McCafferty, CBI chief economic adviser, said in the press
release: “A third quarter of strong volume growth shows the financial
services recovery is building strength. It is particularly good news
that firms consider their level of business to be only slightly below
normal, for the first time since the financial crisis began in 2007.”

“While business with private individuals has again shown the
fastest growth, business with companies also shows some signs of
improvement. Firms’ profitability has improved due to higher incomes and
another big drop in the value of non-performing loans.”

The survey was conducted between February 24 and March 10 – before
the earthquake struck eastern Japan and before the ramifications of the
recent oil crisis were fully felt.

–London Bureau; Tel: +442078627492; email: ukeditorial@marketnews.com

[TOPICS: M$B$$$, MABDS$]