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Banks ‘show first recovery signs’

Financial firms may be recovering, with business volumes growing for the first time in two years, a survey has shown.

Business increased in three months to early September, said 7% of those surveyed by PricewaterhouseCoopers and business organisation the CBI.

But business volumes at building societies and life insurers dropped, suggesting an economic recovery is far from a done deal.

"Future demand is still a major concern," said the researchers.

On balance, 36% of financial services firms are more optimistic about the general business situation than in June.

"For the first time since June 2007, banks are experiencing an upswing in confidence," said Andrew Gray, head of financial services consulting at PricewaterhouseCoopers.

"Confidence is, in part, offset by concerns of further impairments and the impact of 'tougher' regulation."

The UK's five largest banks recently accepted curbs on bonuses agreed by G20 leaders at the recent Pittsburgh summit, and stronger rules on overall banking are likely to follow.

'Happy' traders

Securities trading - behind much of the toxic waste that almost brought down the financial system last year - rose as well, driven by a record level of growth in dealings with financial institutions and "healthy" growth in business with overseas customers.

"Securities traders are enjoying life again," said Pars Purewal, who looks after UK asset management at PricewaterhouseCoopers.

"For the first time in the survey's 20-year history, all respondents are feeling optimistic about their business situation, a reflection of the rebound in equity markets."

Mr Purewal said caution remained over the "threat of regulation" and whether demand would keep holding up.

The survey showed profitability at building societies was "broadly flat" over the three months, with a resumption of declines expected in the current quarter.

"Confidence among the building societies has fallen as funding difficulties continue to put pressure on profitability," Mr Gray said.

"Signs of stabilisation in the housing market, however, have provided some cause for 'cautious cheer'."

But he added that almost all were cutting operating costs and staff.

http://news.bbc.co.uk/2/hi/business/8289407.stm