Dawn of New Year Brings Profits for Financial Services; GROWTH SLOWED BY SURPRISE RISE IN COSTS SUCH AS STAFFING

Western Mail (Cardiff, Wales), April 2, 2013 | Go to article overview

Dawn of New Year Brings Profits for Financial Services; GROWTH SLOWED BY SURPRISE RISE IN COSTS SUCH AS STAFFING


Byline: RHODRI EVANS Assistant Business Editor rhodri.evans@walesonline.co.uk

BRITAIN'S financial services sector rebounded strongly in the first quarter of the year, according to the latest CBI/PwC Financial Services Survey.

The survey found that profit growth was driven mainly by a further widening in spreads and an increase in income from fees, commissions and premiums. But the pace of growth was slower than expected, in part because of a surprise rise in costs, particularly staff costs, following an unexpected rise in employment.

Financial services companies said they were more optimistic about their overall business situation and business volumes and profits are both expected to grow again in the next quarter. However, the survey found that regulation and compliance costs are likely to remain a drag on business.

Matthew Fell, CBI director for competitive markets, said: "This has been a strong quarter for the financial services sector, with robust growth in business volumes, an increase in profitability and upbeat investment intentions.

"Concerns over the lack of availability of professional staff have eased since January and overall employment rose unexpectedly this quarter.

"But recent problems in Cyprus risk re-igniting concerns about eurozone stability. At the same time, regulation and compliance are still likely to be significant drags on business throughout this year."

Within the embattled banking sector the survey found that sentiment improved for a second consecutive quarter.

It found that banks' business volumes rose at a strong pace, for a second quarter, and the level of business was considered to be only slightly below normal. Bank profitability rose for a fourth consecutive quarter, driven by rising volumes, growth in income, and only a modest appreciation in costs. Investment intentions strengthened across all categories.

Statutory legislation and regulation was regarded as the factor most likely to act as a limit on business over the year ahead.

Among building societies optimism rose at its fastest rate in seven years as growth in business volumes surpassed expectations.

Profitability rose strongly for the second successive quarter, boosted by a rise in income values. Numbers employed also increased faster than expected. Business volumes are predicted to grow more moderately over the coming three months.

Steve Davies, PwC partner, retail & commercial banking, said banking confidence was slowly gaining ground. …

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