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Strong growth in financial services activity

28/06/2012

By Daniel Hunter

Financial services business volumes and income both grew strongly in the three months to June, but firms say they are less optimistic about their business situation than in the last quarter.

Of the 108 financial companies that responded to the CBI/PwC survey, 59% saw volumes rise in the quarter to June, and 21% reported a fall. The resulting rounded balance of +39% marks a further acceleration in the rate of growth, as well as being the ninth consecutive quarter of growth. Companies reported that overall levels of business were above normal (+10%), for the first time since June 2007.

The improvement in growth was driven by business with overseas customers (+42%) and financial institutions (+15%). Business with private individuals continued to rise at a similarly solid pace to the previous quarter (+19%), but with industrial and commercial companies it was broadly flat (+3%).

Income also rose strongly, with the increase in income from fees, commissions, and premiums (+43%), and net interest, investment & trading (+37%) relative to the previous three months both beating expectations.

Further growth is expected next quarter, but at a slightly slower pace.
At the same time, average spreads widened further over the past three months (+37%), rebounding from a slight weakening in the March survey (+11%).

The combination of strong growth in business volumes and income and a widening of spreads meant that profitability continued to rise solidly (+25%), at a similar pace to the previous quarter (+21%), marking the twelfth consecutive quarter of growth.

But despite strong growth in activity and expectations that this trend will continue, financial services firms overall were less optimistic about their business situation in the three months to June (-13%). This partly reversed the rise in sentiment in the previous quarter (+32%).

Furthermore, in the three months to June, the number of people employed in... continued on page two >

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