Optimism rises across banking and investment sectors – CBI/PwC

According to the latest CBI/PwC Financial Services Survey rising equity markets drove business volumes higher during the quarter to December, with a large majority of investment managers reporting higher fee income.

Volumes are expected to rise further next quarter, the report also said. With pricing power improved and costs falling, profits rose and a further increase is expected. Staffing levels are increasing rapidly, driven primarily by increased demand.

Focussing on the banking sector, CBI/PwC report highlighted that business volumes rebounded strongly in the three months to December, following an unanticipated decline in the previous quarter.

Optimism is therefore strong across the sector, the report said. Investment intentions for the twelve months ahead were also positive across all three
categories for the first time since late 2007.

“Investment in IT is expected to rise most quickly. For the first time in several years, banks also plan to raise investment in land & buildings and in vehicles, plant & machinery,” the report reads.

Looking at the investment management sector, sentiment about the overall business situation also rose to the greatest extent since March
2012 and for the eighth-consecutive quarter.

Growth in business volumes also resumed in the three months to December, being driven entirely by business with private individuals, while business volumes with all other categories of customer was flat or falling. Further solid growth is anticipated in the three months ahead.

Paula Smith, PwC’s UK asset management leader said:
“Investment managers are remaining remarkably optimistic this quarter, even more so than we’ve previously seen. Rising equity markets, higher fee incomes and increased profitability are all contributing factors to this bullish confidence that volumes and revenues will continue to grow over the next quarter.

“However, investment managers need to remain aware of the increasing pressure of compliance costs, as the requirements from the regulator get more complex and controls tighten. This is making operational effectiveness key for many firms, and driving increased investment in headcount as firms look to bolster compliance departments to get in shape to deal with these challenges.”

 

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