01 Executive summary · growth is expected to resume next quarter. Income Income from both fees &...

Financial Services SURVEY september 2012 number 92

A DIFFICULT QUARTER FOR THE FINANCIAL SERVICES SECTOR

Business volumes fell for the first time since June 2009, alongside a decline in income values

and a sharp rise in non-performing loans. As a result, profitability also fell for the first time

since June 2009, with the drag from falling business and income only partially offset by a

further widening in spreads. Other indicators also pointed to a contraction in activity:

employment in the sector fell unexpectedly, and investment intentions for the year ahead

worsened. Regulatory requirements remain the primary justification for investment—now cited

by a record number of firms as a motivation. This, alongside uncertainty about demand, is a

prominent concern for the year ahead.

Banking page 6 Business volumes fell over the past quarter, and income values also failed to

grow. Nonetheless, profitability continued to rise solidly, buoyed by a

widening of spreads and a rise in fees & commissions charged.

Building societies and finance houses

page 10 Both building societies and finance houses reported a rise in business

volumes over the past three months, although this failed to feed through to

profitability, which was broadly flat on the quarter in both sectors.

Life insurance page 16 Business volumes increased strongly, and a similar rise is expected next

quarter. However, costs rose sharply and income increased only modestly,

thereby squeezing profitability, which declined at its fastest pace since

December 2009.

General insurance and insurance brokers

page 20 General insurers saw a fall in both business volumes and profitability over

the past three months, in contrast to the insurance brokers sector, which

reported a rise in both business and profits.

Securities trading page 26 Optimism about the general business situation declined, as business

volumes fell for the fourth consecutive quarter. Profitability decreased at

the fastest pace since March 2008.

Investment management

page 30 Business volumes rose modestly, with a stronger rise expected next quarter.

General optimism increased for the third consecutive quarter. Numbers

employed grew for the third quarter running.

Supplementary questions

page 34 Concern over a further deterioration in financial market conditions have

receded only marginally compared to the last quarter. An overwhelming

majority believe that normal conditions will only resume beyond six months.

Embargoed until 00.01 hrs, Monday 1st October 2012

cbi/pwc financial services survey - september 2012

2

Overall financial services Optimism Sentiment continued to decline at a similar pace to the previous survey in the three

months to September.

Business volumes Business volumes declined unexpectedly over the past three months, for the first time

since June 2009, while the level of business was reported to be well below normal levels.

The contraction largely reflected falls in business with financial institutions and private

individuals, while business grew more weakly than expected with overseas customers.

Business with ICCs advanced quite strongly, however. Aggregate business volumes

growth is expected to resume next quarter.

Income Income from both fees & commissions and net interest & trading fell unexpectedly in

the three months to September. However, both are expected to grow next quarter.

Pricing power Average spreads widened, and commissions, fees & premiums paid grew modestly over

the quarter. Spreads have widened consistently during the past year, and are expected to

do so again, though more moderately, next quarter. Slow growth in fees/commissions

and premiums is also expected over the next quarter.

Costs Total costs rose moderately, but falling business volumes led to unexpected growth in

average costs per transaction. These are expected to fall in the next three months as

volumes recover, while total costs are expected to fall for the first time since December

2010. The value of non-performing loans grew at its fastest rate since December 2009.

Profitability Profitability fell for the first time since June 2009, as a result of lower business volumes

and income values and higher total costs. The overall profitability of business is

expected to be unchanged over the next three months.

Employment Numbers employed fell strongly and unexpectedly over the quarter and firms expect to

further reduce numbers employed, though at a slower rate, over the next three months.

Staff turnover increased, while staff costs as a proportion of total costs were a little bit

lower and are expected to fall further next quarter.

Investment Investment intentions for the year ahead weakened, falling below average in all

categories. Plans for more spending relative to the past year are limited to IT and

marketing budgets. Statutory legislation and regulation strengthened again as the

dominant reason capital spending in the coming year, receiving its highest number of

citations since it was first asked in March 2004. The other factors were all lower than

average, with capacity expansion posting its lowest score in the survey’s history.

Uncertainty about demand/business prospects moved up sharply as a factor likely to

limit investment, with the highest proportion of citations since December 2009.

The year ahead

The level of demand remained the most likely constraint to business expansion in the

year ahead, holding close to its higher score in the previous survey. Meanwhile, a

constraint felt more keenly than of late is statutory regulation and legislation, which

posted its highest number of citations since March 2011.

Growth Cross selling to existing customers and acquiring new customers are predicted to be

growth sources in the next three months, but the third most common answer was “no

growth expected” - the highest response since the question began in March 2009.

overall

3

-80

-60

-40

-20

0

20

40

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

% balance

-60

-40

-20

0

20

40

60

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

past 3 months next 3 months% balance

-80

-60

-40

-20

0

20

40

60

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-60

-40

-20

0

20

40

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Total operating costs Average operating costs% balance

CBI/PwC Financial Services Survey Survey number 92, September 2012

Overall Conducted between 20th August and 6th September 2012 *All figures are percentage balances of respondents except questions 9-13 where figures are percentages of firms responding.

Q1: optimism versus three months earlier Q3 (a): trend in volume of business

Q5 (g): trend in overall profitability Q5 c&d: total & average costs (past three months)

2012Sep Dec Mar Jun Sep

1 -20 -24 +32 -13 -12

2a) -37 +3 -19 +10 -44b) -1 +34 -21 +40 -6

3 Excluding seasonal variations, what are the trends in:a) - past 3 months +10 +29 +23 +39 -19

- next 3 months +5 +19 +34 +33 +12

b) - past 3 months +15 +28 +13 +43 -15

- next 3 months +5 +20 +19 +29 +24c) - past 3 months +6 +24 +3 +37 -29

- next 3 months +3 +30 +7 +28 +11

** in sterling

Are you more or less optimistic about THE OVERALL BUSINESS SITUATION IN YOUR SECTOR?

Excluding seasonal variations, do you consider that in volume terms:Your present level of business (above/below normal) is:Your present level of business with overseas customers (above/below normal) is:

Volume of business

Value** of fee, commission or premium income

Value** of net interest, investment or trading income

value and volume of business

Sentiment declined compared to three months ago.

Business volumes declined unexpectedly.

Profitability declined marginally.

Average transaction costs grew over the past three months.

Q1Latest -12Previous -13Mean +3

Q3a: Past Q3a: NextLatest -19 +12Previous +39 +33Mean +12 +18

Q5g: Past Q5g: NextLatest -6 +1Previous +25 +16Mean +10 +11

Q5c: Past Q5d: PastLatest +9 +12Previous +20 -11Mean +5 -12


4

charges, costs and profitability

employment and training

marketing expenditure

capital expenditure


4

a) - past 3 months +6 +28 +4 +3 +25

- next 3 months +10 +29 +7 +14 +33b) - past 3 months -2 -7 -1 +15 -19

- next 3 months +23 +1 +6 +17 -4c) - past 3 months +1 +11 +21 +19 -11

- next 3 months +12 +14 +20 +24 +1d) - past 3 months -6 +18 -8 +42 +12

- next 3 months -3 +22 -2 +42 +14

5a) - past 3 months +3 +43 +11 +37 +22

- next 3 months +5 +26 +1 +18 +9b) - past 3 months +6 +33 +1 +38 +5

- next 3 months +1 +19 +11 +12 +6c) - past 3 months 0 +1 +23 +20 +9

- next 3 months +10 +26 +23 +7 -10d) - past 3 months -11 -12 +8 -11 +12

- next 3 months -1 -15 -5 -15 -24e) - past 3 months -7 +3 +4 +4 +28

- next 3 months -6 -14 +9 +3 +5of which:Retail - past 3 months -7 +21 0 +17 +11

- next 3 months -6 +5 +9 0 +15Corporate - past 3 months -3 +5 +3 +29 +8

- next 3 months -4 -15 +7 +8 +5g) - past 3 months +16 +14 +21 +25 -6

- next 3 months -4 +11 +9 +16 +1

6a) - past 3 months +5 -13 +19 -7 -22

- next 3 months -11 -18 +20 +15 -9b) - past 3 months -5 -5 +7 +12 +5

- next 3 months +10 +4 +10 +13 +16c) - past 3 months +15 -20 +16 -5 -6

- next 3 months -13 -20 +31 -4 -24

6.1- past 3 months +19 +23 +1 +18 +10- next 3 months +11 +18 -2 +23 +4

7 +13 -10 +16 0 +10

8

a) Land and buildings -10 -29 -5 +2 -40

b) Vehicles, plant & machinery -12 -21 -5 -18 -33

c) Information technology +31 +4 +47 +25 +14

9

48 50 47 40 45

66 62 73 64 6247 49 45 15 21

48 59 62 27 4348 28 47 19 15

Statutory legislation and regulation 54 49 54 68 761 2 0 2 0

10

48 45 46 27 24

14 28 8 22 256 5 8 3 4

50 54 55 48 7324 12 35 18 13

4 7 13 3 1

What is the trend in your 'volume of business' with regard to the following categories of customer:

Industrial & commercial companies

Financial institutions

Private individuals

Overseas customers (UK-based operations)

Excluding seasonal variations, what are the trends for:Average spreads

Average commissions/fees/ premiums paidTotal operating costs (excluding cost of funds)Average operating costs per transaction

Value of non-performing loans

Overall profitability of business

Excluding seasonal variations, what are the trends in:Numbers employed

Training expenditure

Staff costs as a proportion of total costs

What has been the trend with regard to your staff turnover:

Do you expect to authorise more or less expenditure on marketing in the NEXT 12 MONTHS than you did in the PAST 12 MONTHS

Do you expect to authorise more or less capital expenditure in the NEXT 12 MONTHS than you authorised in the PAST 12 MONTHS on:

What are the main reasons for any expected CAPITAL EXPENDITURE AUTHORISATION over the NEXT 12 MONTHS*

Cost of financeUncertainty about demand/business prospectsShortage of labour including managerial & supervisor staff

To provide new services

To increase efficiency/speedTo reach new customers

For replacementTo expand capacity

Other

Other

What factors are likely to limit (wholly or partly) your capital authorisations over the NEXT 12 MONTHS*

Inadequate net return on proposed investmentShortage of finance

Charges, costs and profitability



capital expenditure

overall

5

2012

Sep Dec Mar Jun Sep11

Level of demand - Total 73 70 75 83 82- Overseas 22 38 41 56 54

Staff turnover - Total 2 3 8 1 1- Overseas 0 0 0 0 0

Availability of professional staff - Total 20 9 15 8 8- Overseas 8 2 3 9 3

Availability of clerical staff - Total 0 2 7 2 1- Overseas 0 0 0 0 0

Adequacy of systems capacity - Total 23 10 17 14 14- Overseas 5 1 4 3 0

Ability to raise funds - Total 13 15 14 9 5- Overseas 7 6 3 0 1

of which:Ability to raise capital - Total 12 7 12 5 5

- Overseas 0 5 5 0 1Availability of wholsesale funds - Total 7 9 13 3 4

- Overseas 5 5 3 0 1Competition - Total 52 74 52 51 53

- Overseas 23 53 24 33 30Statutory legislation and regulation - Total 52 48 42 54 60

- Overseas 19 31 14 32 32Other - Total 1 1 0 0 2

- Overseas 1 0 0 0 0

11.1+61 +77 +58 +77 +76

12Your sector of financial services 96 84 85 88 98Other sectors of financial services 34 44 38 40 33Companies currently positioned outside of financial services 21 29 14 23 18New entrants 36 39 39 31 25Other 0 3 0 0 0

13Cross sales to new customers 39 42 45 40 26Cross sales to existing customers 48 69 44 73 47Acquisition of domestic customers 54 44 55 48 45Acquisition of international customers 16 26 12 27 18New products 30 27 32 14 11No growth expected 17 16 13 8 36

14

Organic growth activities:Acquiring new customers +72 +32 +53 +46 +48Cross-selling to existing customers +25 +39 +37 +40 +59Retaining existing customers +36 +30 +42 +47 +43Launching new products/services +22 -21 +28 +8 +5

Inorganic growth activities:Engaging in M&A transactions +11 -9 +11 +1 -11Forming strategic partnerships/alliances +27 +1 +15 +12 0

Market focus for growth:Increasing market share in domestic markets +58 +49 +51 +36 +59Increasing market share in international markets -1 +32 +18 +29 +19

Investment in enablers to growth:Brand and advertising +23 +32 +24 +33 +35Sales force and distribution channels +47 +45 +43 +32 +46

+50 +31 +34 +46 +65

Performance measurement processes/tools +27 +3 +16 +7 +24IT systems and applications +52 +18 +41 +21 +28

CRM/marketing capabilities (e.g. pricing, segmentation, profitability analysis)

What factors are likely to limit your ability to increase your level of business over the NEXT 12 MONTHS*

Relative to the past 12 months, how important do you think the following elements will be to your organisation's growth strategy over the next 12 months?

What do you expect to spend on regulatory compliance in the NEXT 12 MONTHS?

Where do you see your competition coming from in the next 12 months?

Where do you think your growth will come from over the next 3 months?

business prospects

growth


6

Banking

Optimism Sentiment about the overall business situation was unchanged for the second

consecutive quarter.

Business volumes Business volumes fell unexpectedly in the three months to September and for the first

time in a year. This was driven wholly by a fall in business with financial institutions—

business with ICCs and overseas customers actually rose solidly. Respondents expect

total business volumes to return to growth over the next three months.

Income Fee, commission and premium income was flat, following persistent growth over the

previous five quarters. But net interest and trading income fell at its fastest pace since

March 2009. However, bankers expect a strong rise in income values over the next three

months.

Pricing power Average spreads widened sharply and fees & commissions rose solidly, although the

increase in both was slower than in June. A similar rise in both is expected over the next

three months.

Costs Total costs were flat for the second consecutive quarter, while average costs were also

unchanged. However, the latter disappointed expectations of a decline. Furthermore,

the value of non-performing loans rose sharply, at the fastest pace since December 2009.

Both total and average costs are expected to fall over the next three months, the latter

more sharply so, while non-performing loans are expected to be flat.

Profitability Despite falling business volumes and an absence of growth in income, profitability rose

solidly, buoyed by a widening of spreads and a rise in fees and commissions charged.

Barring the March 2012 survey, profitability has been rising steadily since the beginning

of 2011, and is expected to continue growing next quarter.

Employment Numbers employed fell sharply for the second consecutive quarter, and staff costs as a

proportion of total costs continued to decline. Headcount is expected to continue falling

over the next three months, but at a slower pace.

Investment Planned investment in land & buildings and vehicles, plant & machinery both

deteriorated further, and are now at their weakest since June 2009 and March 2010

respectively. However, firms plan to invest slightly more in IT over the year ahead.

Regulatory requirements remain the main motivation for capital spending, cited by 97%

of respondents, but the proportion planning to provide new services through

investment also rose to its highest since June 2010. However, uncertainty over demand

has picked up sharply to be almost universally cited as a constraint to authorising

The year ahead While the level of demand is once again expected to be the main constraint to business

expansion, the proportion citing competition and regulation as limitations has also

picked up—indeed, overseas regulation/legislation is now at a record high as a

constraint, while almost all respondents expect to increase regulatory spend. In the year

ahead, firms expect cross-selling to existing customers and investing in CRM/marketing

banking

7


Banking Conducted between 20th August and 6th September 2012 *All figures are percentage balances of respondents except questions 9-13 where figures are percentages of firms responding.

Q1: optimism versus three months earlier Q3(a): trend in volume of business

Q5(g): trend in overall profitability Q5c&d: total and average costs (past 3 months)


Business sentiment was broadly unchanged.

Business volumes set to grow at a solid pace over the next three months.

Profitability rose for the second quarter running.

Average costs were broadly.

2012

Sep Dec Mar Jun Sep

1-7 -5 +26 -1 -1

2a) -56 +42 -21 +45 -63b) +15 +91 -23 +92 -2

3 Excluding seasonal variations, what are the trends in:a) - past 3 months -3 +90 +30 +93 -32

- next 3 months +11 +41 +30 +47 +32b) - past 3 months +26 +91 +18 +94 0

- next 3 months +11 +43 +14 +47 +62

c) - past 3 months +23 +91 +20 +95 -33

- next 3 months +11 +90 0 +93 +60

** in sterling

Volume of business


Value** of fee, commission or premium incomeValue** of net interest, investment or trading income


-80

-60

-40

-20

0

20

40

60

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

% balance

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-100

-80

-60

-40

-20

0

20

40

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Total operating costs Average operating costs% balance


Q3a: Past Q3a: NextLatest -32 +32Previous +93 +47Mean +14 +20

Q5g: Past Q5g: NextLatest +30 +30Previous +46 +47Mean +14 +16

Q5c: Past Q5d: PastLatest +2 +1Previous +3 -43Mean -4 -19


8

2012


a) - past 3 months +4 +46 +10 0 +31- next 3 months +15 +43 +10 0 +63

b) - past 3 months -7 -2 -11 +46 -33- next 3 months +15 -3 -2 +46 0

c) - past 3 months -7 +45 +28 +47 +1- next 3 months +19 +45 +28 +49 +2

d) - past 3 months -7 +45 -11 +92 +30

- next 3 months +11 +45 +6 +93 +32

5a) - past 3 months 0 +94 +8 +93 +62

- next 3 months -7 +48 +10 +47 +31

b) - past 3 months +11 +94 +10 +93 +31

- next 3 months 0 +47 +30 +47 +31c) - past 3 months +7 +3 +30 +3 +2

- next 3 months +30 +48 +46 +1 -29

d) - past 3 months +7 -44 +24 -43 +1

- next 3 months +30 -44 +18 -45 -61

e) - past 3 months -7 -1 +2 +1 +61

- next 3 months -19 -46 +8 +3 0of which:Retail - past 3 months -7 +45 -3 +47 +30

- next 3 months -7 -1 +8 +2 +30

Corporate - past 3 months 0 -1 -6 +46 0

- next 3 months -11 -46 +8 +2 +1

g) - past 3 months +34 +45 +3 +46 +30

- next 3 months -3 +42 -8 +47 +30

6a) - past 3 months +14 -45 +28 -46 -60

- next 3 months -19 -46 +33 +1 -30b) - past 3 months 0 -1 -8 -2 0

- next 3 months +14 -1 +14 0 +31c) - past 3 months +22 -44 +5 -46 -31

- next 3 months -23 -45 +44 -46 -60

6.1- past 3 months 0 +44 -3 +46 +30- next 3 months +11 +45 +2 +46 -1

70 -46 +2 0 0

8

a) Land and buildings -26 -48 -9 -2 -92b) Vehicles, plant & machinery -19 -46 -11 -47 -62c) Information technology +26 0 +44 -1 +4

9

37 51 55 51 6552 53 67 51 6844 49 41 4 348 50 67 3 3648 3 55 3 3


10

33 51 53 4 419 48 0 47 320 1 0 2 156 52 53 50 9630 3 25 2 27 1 14 0 0

To reach new customers

Other

Cost of financeUncertainty about demand/business prospects



Average commissions/fees/ premiums paid

Shortage of labour including managerial & supervisor staff

Inadequate net return on proposed investment

Other

Shortage of finance

To increase efficiency/speed



Private individuals

Average spreads



Excluding seasonal variations, what are the trends in:

Excluding seasonal variations, what are the trends for:


Total operating costs (excluding cost of funds)Average operating costs per transaction


What are the main reasons for any expected CAPITAL EXPENDITURE AUTHORISATION over the NEXT 12 MONTHS*To provide new services





Numbers employed


capital expenditure




banking

9


11








- Overseas 0 1 11 0 1Availability of wholesale funds - Total 11 2 17 1 2





11.1+63 +97 +72 +97 +98



14

Organic growth activitiesAcquiring new customers +85 +3 +63 +51 +35Cross-selling to existing customers +15 +49 +55 +48 +96Retaining existing customers +19 +3 +60 +48 +34Launching new products/services -11 -91 +24 0 -30

Inorganic growth activitiesEngaging in M&A transactions -11 -1 0 +1 -32Forming strategic partnerships/alliances +7 +1 +10 0 -29

Market focus for growthIncreasing market share in domestic markets +70 +50 +55 +50 +65Increasing market share in international markets -26 +45 +18 +47 +33

Investment in enablers to growthBrand and advertising +26 +49 +24 +48 +64Sales force and distribution channels +33 +49 +52 +48 +63

+26 +47 +18 +49 +95

Performance measurement processes/tools +11 +2 +14 +1 +33

IT systems and applications +37 +2 +63 +3 +4







growth

business prospects


10

Building societies and finance houses

Optimism Building societies were less optimistic about the overall business situation compared to

the last quarter, although the rate of deterioration in sentiment eased somewhat.

Business volumes Business volumes grew strongly over the past quarter, and at a faster pace than expected.

Volumes are expected to grow again in the coming quarter, but at a slower pace.

Profitability Overall profitability was broadly flat in the three months to September, in line with

expectations. Profitability is expected to fall strongly in the coming quarter, reflecting

falling incomes and narrowing of spreads.

Employment Numbers employed fell at the strongest pace since December 2010 over the last quarter

and are expected to continue falling over the next three months.

Investment Building societies plan to increase expenditure on IT expenditure in the coming year,

with replacement the main reason cited.

Building societies

-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Finance Houses Optimism Optimism among finance houses was unchanged over the last three months.

Business volumes Business volumes grew unexpectedly over the last quarter, albeit at a slower pace than in

the three months to June. However, finance houses reported the level of business as

significantly below normal.

Profitability Overall profitability was unchanged in the three months to September, despite

expectations of another strong increase. It is expected to fall in the next quarter on the

back of falling incomes and narrowing of spreads.

Employment Numbers employed unexpectedly rose in the three months to September, but headcount

is expected to be reduced over the next quarter.

Investment Expenditure on IT, vehicles, plant & machinery & land and buildings is set to decrease

in the year ahead relative to the past 12 months, with demand uncertainty and

inadequate net return investment constraints.

Building societies Q3 (a): trend in volume of business Finance houses Q3 (a): trend in volume of business

Business volumes grew at a faster pace over the last three months.

Business volumes grew again in the three months to September but are set to fall over the next quarter.

Q3a: Past Q3a: NextLatest +48 +28Previous +6 +31Mean +8 +5

Q3a: Past Q3a: NextLatest +22 -34Previous +66 -21Mean +12 +8

building societies and finance houses

11


Building societies Conducted between 20th August and 6th September 2012 *All figures are percentage balances of respondents except questions 9-13 where figures are percentages of firms responding.


1 -5 -97 +34 -91 -20

2a) -48 0 -29 -56 0b) 0 0 0 0 0

3 Excluding seasonal variations, what are the trends in:a) - past 3 months -1 -44 +33 +6 +48

- next 3 months +47 +3 +4 +31 +28b) - past 3 months +44 -46 +33 +1 +25

- next 3 months +47 +1 +33 +32 +22c) - past 3 months -2 -48 +3 +33 -1

- next 3 months +48 -1 +30 -2 -45

** in sterling4

a) - past 3 months -48 +44 -32 0 +1- next 3 months -48 +44 0 0 0

b) - past 3 months -48 -1 0 +1 -1- next 3 months 0 0 +1 -31 -1

c) - past 3 months -1 -47 +32 +6 +48- next 3 months +46 0 +36 +32 +28

d) - past 3 months 0 0 0 0 0- next 3 months 0 0 0 0 0

5a) - past 3 months -98 -2 +64 +61 -26

- next 3 months -5 +44 +31 -31 -46b) - past 3 months -3 0 0 0 +1

- next 3 months -3 -1 +3 +1 0c) - past 3 months -44 +1 -28 +1 +26

- next 3 months -44 +4 -28 +2 +1d) - past 3 months -44 0 -30 0 -23

- next 3 months -44 +3 +1 +31 -23e) - past 3 months -47 +46 +29 +29 +22

- next 3 months -1 +47 +31 +30 +24of which:Retail - past 3 months -93 +1 -2 -35 -47

- next 3 months -46 +47 +31 -1 -23Corporate - past 3 months -3 +91 +62 +62 +22

- next 3 months 0 +46 +31 +32 +23g) - past 3 months +43 +47 +2 +62 -3

- next 3 months -3 -46 +32 0 -46

6a) - past 3 months -1 +48 +33 +3 -21

- next 3 months +44 +3 +33 +2 -21b) - past 3 months 0 +2 +2 +36 +24

- next 3 months +45 +2 +34 +33 +4c) - past 3 months -1 +1 -30 +2 -23

- next 3 months -1 +1 +2 -29 -20

6.1- past 3 months +45 -48 +27 -1 -2- next 3 months -2 -1 -31 +1 0


Average operating costs per transaction


Numbers employed


Average commissions/fees/ premiums paidTotal operating costs (excluding cost of funds)



Your present level of business with overseas customers (above/below normal) is:

Average spreads


Private individuals







Excluding seasonal variations, do you consider that in volume terms:

Volume of business


Your present level of business (above/below normal) is:





12


7+6 +50 -27 +3 +5

8

a) Land and buildings +47 0 0 -3 -1b) Vehicles, plant & machinery -1 -1 0 +30 -24c) Information technology +96 +46 +65 +66 +28

9

49 50 36 36 25100 97 65 64 4999 50 35 35 2597 97 67 66 7547 48 1 2 1


10

55 52 37 66 492 1 1 1 11 1 1 1 24

55 52 37 36 2547 2 1 3 30 46 62 31 1

11













11.1 +50 +98 +98 +99 +30





Other






Other




To increase efficiency/speedTo reach new customersFor replacementTo expand capacity

Shortage of finance


capital expenditure

business prospects


13

growth 2012

Sep Dec Mar Jun Sep


14

Organic growth activitiesAcquiring new customers +6 +4 +37 +36 +74Cross-selling to existing customers +5 +4 +1 +34 +48Retaining existing customers +100 +7 +5 +67 +50Launching new products/services +4 +99 +34 +34 +50

Inorganic growth activitiesEngaging in M&A transactions +1 +1 -1 +1 -1Forming strategic partnerships/alliances +5 +3 -1 +3 -1

Market focus for growthIncreasing market share in domestic markets +6 +5 -26 +33 +74Increasing market share in international markets 0 0 0 0 0


+51 +2 -1 +2 +23






Finance Houses Conducted between 20th August and 6th September 2012 *All figures are percentage balances of respondents except questions 9-13 where figures are percentages of firms responding.

2012

Sep Dec Mar Jun Sep

1-17 +16 +57 +6 0

2a) 0 +17 -22 +39 -39b) 0 0 -27 +6 +22

3 Excluding seasonal variations, what are the trends in:a) - past 3 months +41 +50 -22 +66 +22

- next 3 months +24 0 +36 -21 -34b) - past 3 months 0 +33 -2 +6 -17

- next 3 months 0 +16 +15 +6 -39c) - past 3 months 0 -17 -27 +72 -44

- next 3 months -17 -17 +10 -21 -56

** in sterling4

a) - past 3 months 0 +33 +5 +45 +39- next 3 months -17 0 +46 -21 -17

b) - past 3 months 0 +17 +10 0 -22- next 3 months 0 +17 +10 0 -22

c) - past 3 months 0 +17 +20 +45 -83- next 3 months 0 +33 +47 +6 -39

d) - past 3 months 0 -17 0 +6 +22- next 3 months 0 -17 0 -21 +22

Volume of business



Private individuals






Excluding seasonal variations, do you consider that in volume terms:Your present level of business (above/below normal) is:



14


5a) - past 3 months 0 +17 -17 +54 -66

- next 3 months 0 +17 -17 +6 -61b) - past 3 months 0 0 -2 0 -5

- next 3 months 0 0 -2 0 -22c) - past 3 months +17 -17 +17 +33 0

- next 3 months 0 0 0 0 0d) - past 3 months +17 -17 -10 +21 +39

- next 3 months 0 0 -10 +27 -5e) - past 3 months -41 -17 -10 +27 +22

- next 3 months +17 +17 +17 0 -22of which:Retail - past 3 months 0 0 -10 0 +22

- next 3 months 0 +17 +17 0 -22Corporate - past 3 months -83 -17 -10 +27 +22

- next 3 months +17 0 -10 0 -22g) - past 3 months +59 +50 +73 +12 0

- next 3 months 0 +16 +30 +45 -22

6a) - past 3 months 0 +32 -10 +41 +18

- next 3 months 0 +50 -27 0 -22b) - past 3 months 0 +34 0 +29 +22

- next 3 months 0 +16 0 +21 +22c) - past 3 months +59 -16 +7 +35 +18

- next 3 months 0 -16 -10 -33 -22

6.1- past 3 months +41 -18 -27 0 0- next 3 months 0 +18 0 0 -22

7 +41 +17 -2 +12 +22

8

a) Land and buildings 0 +17 -44 +14 -22b) Vehicles, plant & machinery 0 +33 -17 +14 -22c) Information technology +17 +17 +20 +34 -5

9

41 17 64 61 44100 33 90 59 5683 50 80 18 2241 33 90 28 5659 33 64 33 39


10

59 17 64 20 440 33 37 26 220 17 54 12 22

100 33 90 51 4441 0 27 27 00 17 0 0 0




Shortage of finance





Other


Other

Average spreads










Numbers employed





capital expenditure


15


11













11.1+41 +67 +75 +72 +66



14

Organic growth activitiesAcquiring new customers +100 +83 +63 +59 +22Cross-selling to existing customers 0 0 +10 +6 +22Retaining existing customers +41 +17 +47 +21 +44Launching new products/services +83 -33 +49 +68 -10

Inorganic growth activitiesEngaging in M&A transactions +100 0 +5 0 +17Forming strategic partnerships/alliances +100 0 +70 +66 +17

Market focus for growthIncreasing market share in domestic markets +100 +50 +47 +14 +39Increasing market share in international markets 0 +17 0 +21 0

Investment in enablers to growthBrand and advertising +41 +17 +36 +62 0Sales force and distribution channels +100 0 0 +53 +39

+83 0 +10 +15 +22

Performance measurement processes/tools +41 -50 -10 +8 0IT systems and applications +41 +33 +15 +49 0







business prospects

growth


16

Life insurance Optimism Life insurers were less optimistic about the overall business situation in the three

months to September.

Business volumes Business volumes increased for the eleventh successive quarter, and at the strongest pace

since June 2011. Life insurers consider the level of business to be well above normal.

Business volumes are expected to rise at a similar rate next quarter. The main sources of

growth were business with private individuals and industrial & commercial companies,

with similar rates of growth expected to be sustained in the three months ahead.

Pricing power Average commission/fees & premiums were flat in the three months to September,

despite expectations of another sharp fall. However, they are expected to decline next

quarter. Average spreads were unchanged, in line with expectations, and this is

predicted to remain the case next quarter.

Income Premium, fee and commission income rose only slightly, but is expected to increase

strongly again next quarter. In contrast, income from net interest, investment and

trading declined sharply for the second quarter running, but is expected to stabilise over

the next three months.

Costs Total operating costs rose sharply for the third quarter running, and a further, but

smaller rise is expected next quarter. Average costs per transaction increased at their

fastest pace since September 2002, but are expected to flatten out next quarter.

Profitability Overall profitability, squeezed by rising costs and sluggish pricing power, declined at its

fastest pace since December 2009. A further small fall is expected next quarter.

Employment Numbers employed rose strongly for the fourth consecutive quarter, and a similar

increase is expected next quarter. Training expenditure also rose rapidly over the past

three months.

Investment Life insurers are planning to invest considerably more in IT and marketing in the year

ahead. This is driven mainly by the need to increase efficiency, as well as to meet

legislative and regulatory requirements. However they are expecting to cut back

expenditure on fixed capital modestly.

The year ahead In the year ahead statutory legislation and regulation, and adequacy in systems capacity

are the two factors most likely to limit business expansion.

Growth Life insurers expect their existing customer base to be the primary source of growth over

the next three months. The main elements of their growth strategy are to acquire new

customers, cross-sell to existing customers, and strengthen marketing efforts.

life insurance

17


1 -59 -33 +5 -6 -10

2a) -33 +6 +95 +77 +77b) -30 0 0 0 0

3 Excluding seasonal variations, what are the trends in:a) - past 3 months +33 +25 +52 +73 +81

- next 3 months +4 -42 +91 +71 +71b) - past 3 months +4 +9 +5 +77 +4

- next 3 months +4 -42 +48 +67 +71c) - past 3 months +30 -47 +5 -77 -73

- next 3 months +30 -24 +91 -10 +4d) Value** of new business - past 3 months -4 +9 +95 +73 +81

- next 3 months -33 -7 +48 +71 +71** in sterling




Volume of business


Life insurance Conducted between 20th August and 6th September 2012 *All figures are percentage balances of respondents except questions 9-13 where figures are percentages of firms responding.

Q1: optimism versus three months earlier Q3 (a): trend in volume of business

Q5 (g): trend in overall profitability Q5 c&d: total & average costs (past 3 months)


Optimism declined in the three months to September.

Business volumes increased strongly. A similar rise is expected next quarter.

Overall profitability fell rapidly. A further small fall is expected next quarter.

Average costs escalated but are expected to flatten out next quarter.

-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

% balance

-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011


-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011


-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Tota l operating costs Average operating costs% balance


Q3a: Past Q3a: NextLatest +81 +71Previous +73 +71Mean +13 +29

Q5g: Past Q5g: NextLatest -73 -6Previous -14 -6Mean +10 +15

Q5c: Past Q5d: PastLatest +96 +79Previous +91 +10Mean -13 -22


18


4

a) - past 3 months +30 +19 +43 +77 +77- next 3 months +30 +19 +43 +77 +77

b) - past 3 months +59 0 0 0 0- next 3 months +59 0 0 0 -10

c) - past 3 months +30 +30 +95 +73 +81- next 3 months +30 -37 +48 +71 +71

d) - past 3 months -30 0 0 0 0- next 3 months -30 0 0 0 0

5a) - past 3 months +30 +22 +38 -73 0

- next 3 months +30 0 -48 0 0b) - past 3 months 0 +14 -43 -77 0

- next 3 months +30 -5 +43 -87 -10c) - past 3 months -33 +8 +91 +91 +96

- next 3 months -30 +8 +43 +14 +19d) - past 3 months -63 -17 +43 +10 +79

- next 3 months -59 -1 -95 +10 +2f) - past 3 months 0 +8 +5 -62 +4

- next 3 months 0 +8 +5 +14 +14g) - past 3 months +33 +31 +43 -14 -73

- next 3 months +4 -42 -38 -6 -6

6a) - past 3 months -25 +45 +95 +85 +80

- next 3 months -25 +22 +95 +85 +85b) - past 3 months -37 +14 +90 +5 +80

- next 3 months -33 +10 +90 +5 +24c) - past 3 months -25 +14 +95 +80 +76

- next 3 months -25 +17 +95 +80 +91

6.1- past 3 months +8 -40 -85 -76 -76- next 3 months +37 -2 -85 0 0

7+33 -1 +48 +67 +96

8

a) Land and buildings +30 +17 +48 0 -10b) Vehicles, plant & machinery -33 -5 +43 0 -10c) Information technology -33 +42 +95 +86 +75

9

93 61 52 9 959 66 95 81 8659 66 52 4 1437 83 95 9 433 42 48 9 4


10

63 45 52 4 1333 28 48 0 030 19 48 0 037 55 57 13 1933 22 95 81 910 19 43 10 0


Value of surrendered contracts


Shortage of financeCost of finance




Other

Uncertainty about demand/business prospectsShortage of labour including managerial & supervisor staff




Other







Average spreads


Total operating costs (excluding cost of funds)

Private individuals


Numbers employed







capital expenditure

life insurance

19


11













11.1 +63 +50 +52 +4 +19



14

Organic growth activitiesAcquiring new customers +67 +39 +52 +14 +86Cross-selling to existing customers +67 +31 +9 +81 +86Retaining existing customers +67 +50 +52 +91 +19Launching new products/services +89 +22 +81 -14 +73

Inorganic growth activitiesEngaging in M&A transactions +33 +28 +43 0 0Forming strategic partnerships/alliances +100 +32 +57 +9 -64

Market focus for growthIncreasing market share in domestic markets +59 +67 +95 +19 +81Increasing market share in international markets +30 0 +5 +4 0


+63 +48 +95 +86 +86

Performance measurement processes/tools -4 +22 +91 0 +4IT systems and applications +93 +3 +91 +81 +86







business prospects

growth


20

General insurance and insurance brokers

Optimism Optimism amongst general insurers fell over the three months to September.

Business volumes Business volumes fell again over the past three months, despite expectations of robust

growth. Business volumes are expected to fall further over the next quarter.

Profitability Profitability fell over the past three months, and is expected to fall at a broadly similar

pace in the next quarter.

Employment Numbers employed rose modestly over the last quarter and are expected to rise at a

broadly similar pace next quarter.

Investment General insurers are planning to spend more on land and buildings and IT in the year

ahead relative to the past twelve months. Investment plans are driven mostly by a need

to meet regulatory requirements and to increase efficiency/speed.

General insurance

Insurance brokers Optimism Optimism amongst insurance brokers fell in the three months to September.

Business volumes Business volumes rose over the last quarter, and are expected to grow again in the three

months to December.

Profitability Overall profitability grew broadly in-line with expectations over the last quarter, and is

expected to grow again in the three months to December.

Employment Numbers employed grew in the three months to September, for the third quarter

running. Headcount is expected to grow at a broadly similar pace next quarter.

Investment Insurance brokers are planning to spend more on IT in the year ahead. Investment plans

are driven mostly by a need to increase efficiency/speed.

General insurance Q3(a): trend in volume of business Insurance brokers Q3(a): trend in volume of business

Business volumes fell over the past three months.

Business volumes grew in the three months to September.

-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Q3a: Past Q3a: NextLatest -15 -33Previous -31 +32Mean +8 +16

Q3a: Past Q3a: NextLatest +20 +18Previous -2 +11Mean +14 +16

general insurance and insurance brokers

21

2012

Sep Dec Mar Jun Sep

1 -45 -5 +5 -61 -36

2a) -43 -18 +5 +3 -39b) -21 -18 0 -19 -41

3 Excluding seasonal variations, what are the trends in:a) - past 3 months -15 +5 +8 -31 -15

- next 3 months -3 +31 +35 +32 -33b) - past 3 months +1 +5 +9 -34 -11

- next 3 months -4 +28 +34 +31 -31c) - past 3 months -45 -54 +4 -22 -1

- next 3 months -26 -28 -15 -60 -58** in sterling

4

a) - past 3 months +23 +5 -33 -29 +25- next 3 months +22 +23 -29 +9 +6

b) - past 3 months +4 +5 +6 -34 -36- next 3 months +23 +5 +10 +4 -36

c) - past 3 months 0 -8 +2 -31 -38- next 3 months +19 -5 0 +8 -14

d) - past 3 months -21 +13 -17 -17 -2- next 3 months -21 +26 -17 +21 0

5a) - past 3 months +41 +5 +19 -21 +19

- next 3 months +41 0 0 -1 +19b) - past 3 months -4 +15 +25 +21 -21

- next 3 months -5 +21 +27 +21 -14c) - past 3 months -17 +28 +23 +8 +9

- next 3 months -16 +31 +25 +5 +2d) - past 3 months +2 +28 +14 +21 +26

- next 3 months +2 +18 -6 +17 +23g) - past 3 months -23 -38 +42 -1 -19

- next 3 months -3 -15 +30 -16 -175.1

- past 12 months +73 +41 +23 -16 +66- next 12 months +47 +33 -33 +21 +41

6a) - past 3 months -17 -17 +22 +6 +7

- next 3 months -18 -23 +23 +3 +4b) - past 3 months -22 -17 +4 -11 -31

- next 3 months -23 -13 +2 -15 -34c) - past 3 months -23 -33 +21 -15 -14

- next 3 months -23 -36 +2 -15 -16

6.1- past 3 months +4 -20 -17 0 -21- next 3 months +4 -13 -15 -22 -19







Volume of business



What has been the trend with regard to the value of insurance claims:

Numbers employed







Total operating costs (excluding cost of funds)

Private individuals

Average spreads




General insurance Conducted between 20th August and 6th September 2012 *All figures are percentage balances of respondents except questions 9-13 where figures are percentages of firms responding.





22


7+9 +5 +13 +1 +16

8

a) Land and buildings +1 -18 -6 -2 +18b) Vehicles, plant & machinery 0 0 -6 -22 -4c) Information technology +7 -8 +27 -13 +7

9

70 41 31 49 969 67 71 77 7690 62 65 67 6153 51 35 46 5042 54 27 45 45


10

68 46 65 48 7122 8 4 0 2226 13 0 0 548 64 56 52 9121 31 23 43 211 3 0 0 0

11













11.1+90 +44 +50 +51 +66


Other








Inadequate net return on proposed investmentShortage of financeCost of financeUncertainty about demand/business prospects

To increase efficiency/speed

To expand capacity


For replacement

Other

To reach new customers



capital expenditure

business prospects


23


1 -12 -79 +26 +22 -15

2a) -59 -75 -26 -35 +1b) -14 -4 -6 +11 -9

3 Excluding seasonal variations, what are the trends in:a) - past 3 months -42 -64 -17 -2 +20

- next 3 months -14 -12 +35 +11 +18b) - past 3 months -31 -55 -5 -12 0

- next 3 months -9 -12 +35 +11 +8c) - past 3 months -2 -8 -5 -19 +22

- next 3 months -18 -9 +22 +1 +11

** in sterling4

a) - past 3 months -6 -1 +4 +7 +17- next 3 months -8 -8 +26 +22 +14

b) - past 3 months -12 -10 -2 +4 +4- next 3 months -12 -10 -2 +4 +4

c) - past 3 months -45 -22 -5 -19 +2- next 3 months -6 -24 +17 -15 +9

d) - past 3 months +4 -4 +6 +14 -4- next 3 months 0 -4 +6 +7 -4

Volume of business



Private individuals








14

Organic growth activitiesAcquiring new customers +51 +51 +87 +74 +30Cross-selling to existing customers +19 +54 +25 +39 +3Retaining existing customers +52 +67 +44 +69 +69Launching new products/services +44 +36 +21 -13 +21

Inorganic growth activitiesEngaging in M&A transactions +20 -26 -10 -15 -21Forming strategic partnerships/alliances +21 -3 +7 +6 +61

Market focus for growthIncreasing market share in domestic markets +27 +41 +12 +56 +31Increasing market share in international markets +42 +33 +44 +21 +19


+66 +46 +48 +63 +26

Performance measurement processes/tools +18 -8 +25 -1 +3IT systems and applications +61 +15 +48 +28 +46




growth


Insurance brokers Conducted between 20th August and 6th September 2012 *All figures are percentage balances of respondents except questions 9-13 where figures are percentages of firms responding.



24


5a) - past 3 months 0 -3 0 +4 +4

- next 3 months 0 -1 -6 +4 +10b) - past 3 months +6 -1 +19 -12 -7

- next 3 months +6 -8 +19 -4 +10c) - past 3 months +26 -44 +41 +34 +25

- next 3 months +14 +9 +57 +19 +41d) - past 3 months +60 +62 +35 +19 +9

- next 3 months +54 0 +44 +8 +18g) - past 3 months -33 -67 +8 -16 +17

- next 3 months 0 -15 +15 +18 +12

6a) - past 3 months -41 -54 +15 +21 +13

- next 3 months -4 -6 +28 +41 +14b) - past 3 months -51 -53 +6 +29 +10

- next 3 months -6 +1 +4 +29 +9c) - past 3 months -2 -57 +24 +22 +27

- next 3 months -8 -5 +39 +37 -3

6.1- past 3 months +62 +3 +4 0 +17- next 3 months +2 +3 -13 +19 -1

7+20 -44 +48 +51 +14

8

a) Land and buildings -26 -65 +5 0 -12b) Vehicles, plant & machinery -18 -72 -22 -19 -24c) Information technology +4 -42 +9 +44 +35

9

24 74 52 40 3778 87 67 74 6924 22 37 45 4524 26 76 48 5970 19 52 49 46


10

64 76 39 55 3810 18 26 11 204 10 17 11 11

44 33 70 78 556 9 24 22 256 2 15 7 10



Other


Average spreads











Numbers employed



Other

Shortage of financeCost of financeUncertainty about demand/business prospects




capital expenditure


25

2012














11.1 +60 +68 +48 +56 +30



14

Organic growth activitiesAcquiring new customers +84 +80 +54 +82 +72Cross-selling to existing customers +72 +65 +63 +49 +34Retaining existing customers +76 +77 +24 +60 +49Launching new products/services +54 +62 +46 +22 +4

Inorganic growth activitiesEngaging in M&A transactions -60 -58 +9 +8 +7Forming strategic partnerships/alliances -35 -41 +20 +14 +10

Market focus for growthIncreasing market share in domestic markets +66 +66 +54 +71 +48Increasing market share in international markets 0 -1 -9 +7 -4


+56 +52 +30 +26 +34

Performance measurement processes/tools +54 -4 +24 -11 -4IT systems and applications +70 +10 +26 +18 +45







business prospects

growth


26

Securities trading

Optimism Optimism among securities traders about the general business situation declined for

the second-consecutive quarter, but at a slower pace.

Business volumes Business volumes fell for the fourth successive quarter and faster than expected. The

decline was broad-based, with business with private individuals falling at its fastest

pace since December 2008. The exception was industrial and commercial companies

where volumes were broadly flat. Total business volumes are expected to fall again in

the three months ahead, but at a slower pace.

Pricing power Average fees, commissions and premiums fell for the fourth-consecutive quarter, at a

similar pace to the two previous quarters. The rate of decline is expected to

decelerate over the next three months.

Income Both net interest, investment or trading income, and fee, commission or premium

income fell-the former for the fourth successive quarter. Both categories of income

are expected to continue falling over the coming three months, but at a more

moderate pace.

Costs Total operating costs fell for the fourth successive quarter, albeit very slightly, and

are expected to increase modestly next quarter. However, average costs per

transaction rose strongly, reflecting the decline in the volume of business.

Profitability Profitability declined at the fastest pace since March 2008 and for the sixth-

consecutive quarter. A further decline in profitability is predicted next quarter.

Employment Numbers employed fell slightly after rising slightly in the previous quarter.

Headcount is expected to fall further over the next three months.

Investment Firms are planning small increases in spending on IT and land and buildings relative

to the last year, driven mainly by legislative & regulatory requirements, followed by

the provision of new services. The shortage of finance emerged as a key barrier to

investment in the year ahead, cited by the highest proportion of firms since

September 1997.

The year ahead The level of demand was the factor most likely to limit business expansion in the

year ahead, with statutory legislation & regulation cited as the second most

important factor.

Growth Launching new products and services, and acquiring new customers are expected to

be the most important sources of growth over the next twelve months.

securities trading

27


Securities trading Conducted between 20th August and 6th September 2012 *All figures are percentage balances of respondents except questions 9-13 where figures are percentages of firms responding.


Q5(g): trend in overall profitability Q5c&d: total & average costs (past 3 months)


Optimism about the overall business situation declined.

Business volumes are expected to fall over the next three months again.

Profitability fell rapidly once again.

Total operating costs declined but average costs rose.

2012

Sep Dec Mar Jun Sep

1-50 -59 +6 -54 -28

2a) +13 -95 -73 -80 -100b) -19 -25 -61 -21 -18

3 Excluding seasonal variations, what are the trends in:a) - past 3 months +53 -100 -21 -61 -95

- next 3 months -51 +12 -34 -40 -32b) - past 3 months +2 -75 -21 -61 -95

- next 3 months -51 +17 -34 -40 -32c) - past 3 months +20 +5 -14 -20 -51

- next 3 months -9 +5 -21 -40 -23

** in sterling





Volume of business

-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

% balance

-150

-100

-50

0

50

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Q1Latest -28Previous -54Mean -2

Q3a: Past Q3a: NextLatest -95 -32Previous -61 -40Mean +9 +3

Q5g: Past Q5g: NextLatest -95 -37Previous -67 -48Mean -0 -4

Q5c: Past Q5d: PastLatest -5 +37Previous -7 +45Mean +16 +3


28


4

a) - past 3 months -9 0 0 -7 0- next 3 months +9 +41 0 0 0

b) - past 3 months -19 -75 -20 -27 -23- next 3 months 0 +7 -14 -20 -4

c) - past 3 months +42 -29 -7 -48 -77- next 3 months -11 -5 -14 -27 -23

d) - past 3 months +20 -25 -41 0 -18- next 3 months -20 +17 -41 -13 -9

5a) - past 3 months 0 0 0 0 0

- next 3 months 0 0 0 0 0b) - past 3 months +9 -81 -26 -20 -23

- next 3 months 0 -20 -20 -7 -14c) - past 3 months +9 -20 -13 -7 -5

- next 3 months +31 -26 -7 -1 +5d) - past 3 months -2 +25 +26 +45 +37

- next 3 months +21 0 +26 +20 +23g) - past 3 months -8 -55 -21 -67 -95

- next 3 months -30 +12 -34 -48 -37

6a) - past 3 months +30 +66 -14 +6 -9

- next 3 months -20 -2 -21 0 -14b) - past 3 months +40 +25 +25 +20 0

- next 3 months +40 +20 -14 +33 +5c) - past 3 months +30 +61 +25 +47 -4

- next 3 months +20 -7 +5 +53 -9

6.1- past 3 months 0 +71 +20 +21 -5- next 3 months 0 -17 +20 +7 +44

7+32 +45 -13 -13 -35

8

a) Land and buildings -19 -51 0 +13 +5b) Vehicles, plant & machinery -9 -5 0 +13 0c) Information technology +62 -55 +14 +40 +9

9

81 71 68 48 5161 71 53 39 2821 66 47 6 1881 91 67 53 4942 86 20 6 5


10

42 29 33 21 230 0 0 13 400 0 0 13 0

61 75 47 87 609 25 26 20 50 0 0 0 5



Other

Shortage of financeCost of finance






To increase efficiency/speedTo reach new customersFor replacement







Private individuals

Average spreads


To expand capacity

Other

Uncertainty about demand/business prospects




Numbers employed





capital expenditure

securities trading

29

2012














11.1+100 +71 +54 +80 +95



14

Organic growth activitiesAcquiring new customers +69 +86 +46 +61 +58Cross-selling to existing customers +40 +55 +41 +40 +18Retaining existing customers +49 +91 +27 +13 +32Launching new products/services -19 +41 -20 +47 +68

Inorganic growth activitiesEngaging in M&A transactions 0 -61 +12 0 +31Forming strategic partnerships/alliances 0 +5 0 +13 +31

Market focus for growthIncreasing market share in domestic markets +51 +75 +41 +21 +37Increasing market share in international markets +19 +66 +6 +13 +5

Investment in enablers to growthBrand and advertising -9 -12 0 +21 +5Sales force and distribution channels +31 +59 0 +26 +9

+72 -12 +41 +61 +37

Performance measurement processes/tools +72 +29 -26 +40 +18IT systems and applications +53 +51 -20 +26 +37







business prospects

growth


30

Investment management

Optimism Optimism among investment managers about the overall business situation increased

for the third consecutive quarter.

Business volumes Business volumes saw a modest increase over the last three months, although the rise

was slower than expected. Financial institutions benefitted from another healthy rise in

business volumes, but private individuals and overseas companies saw little change,

while business volumes in industrial and commercial companies declined slightly.

Investment managers predict a strong rise in business volumes in the three months

ahead with financial institutions and private individuals.

Pricing power Average commissions, fees & premiums rose strongly for the second-consecutive

quarter, with a similar rise expected next quarter. Average spreads narrowed slightly and

a similar narrowing is expected over the coming three months.

Income Fee, commission, or premium income was largely flat after two quarters of growth, but a

strong rise is expected next quarter. Income from net interest, investment or trading

income saw a small rise, and is also expected to increase rapidly in the three months

ahead.

Costs Total operating costs decreased slightly, while average operating costs declined at a

slightly faster pace. Total costs are expected to be largely unchanged next quarter while

average costs are expected to continue falling modestly.

Profitability Helped by falling costs, and rising fees and commissions, profitability increased for the

third successive quarter, and although at a slower pace, it was considerably faster than

the long-run average. A similar rise in profits is expected next quarter.

Employment Numbers employed rose for the second-successive quarter, although not to the extent

expected. Growth in headcount is expected to accelerate considerably in the three

months ahead.

Investment Investment managers expect to increase investment in marketing and IT over the next

twelve months, the latter continuing the positive trend sustained since March 2011.

However, there are no plans to expand spending on vehicles, plant & machinery, and

cutbacks are expected in land and buildings investment. The most important drivers of

investment are reaching new customers and providing new services, both of which have

strengthened significantly as motivations for capital spending, but shortage of finance

has picked up as limiting factor on investment.

The year ahead The level of demand is seen to be the key factor likely to limit business expansion in the

year ahead, followed by legislation & regulation although the latter has receded

somewhat from June.

Growth New products are expected to be the main driver of growth over the next three months.

But cross sales to existing customers decreased considerably in importance.

investment management

31

2012

Sep Dec Mar Jun Sep

1 -11 -33 +85 +30 +42

2a) -4 -33 -50 -17 -6b) +1 +12 -35 +54 -7

3 Excluding seasonal variations, what are the trends in:a) - past 3 months +20 -18 +50 0 +10

- next 3 months -3 -7 +69 +48 +49b) - past 3 months +3 -47 +18 +69 +2

- next 3 months +2 -15 +22 +7 +49c) - past 3 months -2 -30 -17 +39 +8

- next 3 months -2 -24 +8 +29 +41** in sterling



Your present level of business (above/below normal) is:Excluding seasonal variations, do you consider that in volume terms:


Volume of business


Investment management Conducted between 20th August and 6th September 2012 *All figures are percentage balances of respondents except questions 9-13 where figures are percentages of firms responding.


Q5(g): trend in overall profitability Q5c&d: total & average costs (past 3 months)


Sentiment rose for the third consecutive quarter.

Business volumes increased a little, but are expected to rise strongly.

Profitability increased, and a similar rise is expected next quarter.

Total costs fell slightly, and are expected to be flat.

-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

% balance

-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


-100

-80

-60

-40

-20

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Q1Latest +42Previous +30Mean +17

Q3a: Past Q3a: NextLatest +10 +49Previous 0 +48Mean +23 +16

Q5g: Past Q5g: NextLatest +43 +42Previous +71 -10Mean +19 +10

Q5c: Past Q5d: PastLatest -5 -12Previous +46 -7Mean +25 -4


32


4

a) - past 3 months +2 0 0 -41 -6- next 3 months -2 +5 0 +42 0

b) - past 3 months +8 +6 +41 +32 +36- next 3 months +60 +2 +54 +19 +35

c) - past 3 months +4 -31 +12 +9 +2- next 3 months 0 -14 +15 0 +35

d) - past 3 months +7 +6 +13 +54 0- next 3 months +2 -7 +9 +41 0

5a) - past 3 months +4 0 +1 +1 -7

- next 3 months +6 0 0 +1 -7b) - past 3 months +5 -40 +1 +40 +43

- next 3 months -2 0 -48 -10 +42c) - past 3 months +5 -9 -9 +46 -5

- next 3 months +9 +18 -39 +33 +1d) - past 3 months -59 +8 -46 -7 -12

- next 3 months -62 +4 -51 -20 -6e) - past 3 months +2 -5 0 0 0

- next 3 months +2 -5 0 0 0of which:Retail - past 3 months +2 0 0 0 0

- next 3 months +2 0 0 0 0Corporate - past 3 months +2 -5 0 0 0

- next 3 months +2 -5 0 0 0g) - past 3 months +2 -38 +63 +71 +43

- next 3 months +6 -17 +60 -10 +42

6a) - past 3 months +13 -3 -7 +10 +13

- next 3 months -27 +14 -38 +27 +66b) - past 3 months +8 +19 +24 +21 +25

- next 3 months +6 +19 +4 +5 +66c) - past 3 months +27 -8 +79 -32 +19

- next 3 months -27 +25 +57 -12 +66

6.1- past 3 months +46 -9 0 -41 +4- next 3 months +45 +36 +4 -13 +11

7+4 +27 +94 -46 +59

8

a) Land and buildings +10 +3 -8 +12 -30b) Vehicles, plant & machinery +2 +5 0 0 0c) Information technology +77 +54 +85 +44 +56

9

13 40 31 12 6581 78 99 97 635 17 21 0 79

14 66 27 32 2068 23 79 65 50


10

72 21 10 53 500 16 0 0 350 0 0 0 07 25 49 12 434 39 60 20 308 7 0 0 0




Other

Shortage of finance





Other






Private individuals






Average spreads




Numbers employed





capital expenditure

investment management

33

2012









- Overseas 0 0 0 0 0Availability of corporate loans - Total 0 0 18 0 0





11.1+27 +72 +14 +91 +70



14

Organic growth activitiesAcquiring new customers +81 +36 +26 +13 +43Cross-selling to existing customers +14 -3 +13 +17 +34Retaining existing customers +16 +19 +18 +26 +45Launching new products/services +77 +39 +58 -7 -14

Inorganic growth activitiesEngaging in M&A transactions +58 +5 +62 +12 +6Forming strategic partnerships/alliances +63 -2 +10 +13 +27

Market focus for growthIncreasing market share in domestic markets +67 +43 +79 +12 +55Increasing market share in international markets 0 +14 +39 +40 +6


+67 +21 +53 +23 +56








business prospects

growth


34

Supplementary questions Likelihood of further

market deterioration Concern over a further deterioration in financial market conditions over the next six

months has receded marginally. The majority (65%) attribute a medium likelihood to a

further worsening, in contrast to the previous survey where the largest proportion

(58%) thought there to be a high likelihood. Concerns have eased somewhat in most

sectors, but particularly so in banking—only 34% attribute a high likelihood to another

deterioration in market conditions, against an almost unanimous response (96%) in

June.

Resumption of normal financial market conditions

Once again, respondents almost unanimously believed that “normal” financial market

conditions would only resume beyond six months (99% of citations). This is broadly

reflective of all sub-sectors in the survey sample.

UK as a financial centre

The proportion of firms believing that regulatory changes have worsened the

competitiveness of UK financial services remained high (82%), edging only slightly

lower from last quarter (85%). However, there was some variation in perceptions by

sector—around half of building societies (52%) and insurance brokers (48%) believed

that competitiveness was unchanged.

Likelihood of further deterioration in financial markets When will ‘normal’ financial market conditions resume?

Competitiveness of the UK as a financial centre

1.0

1.5

2.0

2.5

3.0

Banking FinanceHouses

BuildingSocieties

GeneralInsurance

Life Insurance InsuranceBroking

InvestmentManagement

Securit iesTrading

Jun'12 Sep'12Rank, 1=low 3=high

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jun Sep Dec Mar Jun Sep

2011 2012

Beyond six months Within six months Within three months

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Banking FinanceHouses

BuildingSocieties

GeneralInsurance

Life Insurance InsuranceBrokers

InvestmentManagement

Securit iesTrading

Less competitive No change More competitive%

information

35

Number of Sample

Survey 92, September 2012 respondents weight

Banking 22 0.40

Building societies 12 0.06

Finance Houses 5 0.06

Life insurance 5 0.07

General insurance 17 0.10

Insurance brokers 20 0.04

Securities trading; stockbroking 8 0.10

Investment management 8 0.12

Private equity (ex venture capital) 5 0.00

Other financial institutions 2 0.05

Total 104 1.00

This quarterly publication is available on a rolling year sub-

scription at the following rates:

CBI Members £210 (four issues), £60 (single issue)

Non Members £360 (four issues), £95 (single issue)

For further information about CBI and PwC publications and services, please contact the CBI Survey Group on (020) 7379 7400 or PwC on (020) 7583 5000.

CBI PwC

Business Survey Unit 7 More London Riverside

Centre Point London SE1 2RT

103 New Oxford Street

London WC1A 1DU

Financial service activities: SIC 64.19/1, 64.19/2, 64.2, 64.3 64.91,

CBI Economic Analysis The CBI economics and survey teams take advantage of the CBI’s diverse contacts with British business to build up an accurate

assessment of the latest developments in the UK and international economy. Widely acknowledged for their professional

standards, the teams’ work is vital since Government statistics, where available, are often slow to be published and are subject to

revision. Apart from the Economic & Business Outlook Quarterly and a review of the UK economy in the Economic & Business

Outlook Monthly Update, the teams publish the unique CBI business surveys outlined below. All results are carefully

scrutinised and discussed by business people and economists before publication.

CBI Senior Economist: William Simpson, E: [email protected]. To subscribe to any of these publications, please

contact: CBI Publication Sales, Centre Point, 103 New Oxford Street, London WC1A 1DU. DL: +44 (0) 207 395 8270. DF: +44

(0) 207 497 3646. E: [email protected]

To participate in our surveys or for further information, please contact: Nicola Grimwood, CBI Survey Management Group,

Centre Point, 103 New Oxford Street, London WC1A 1DU. DL: +44 (0) 207 395 8081. DF: +44 (0) 207 836 5856

E: [email protected]

SAMPLE SIZES AND WEIGHTS SUBSCRIPTION INFORMATION

SECTORS COVERED BY STANDARD INDUSTRIAL CLASSIFICATION

CBI CONTACT DETAILS

Title

Annual subscription

Single issueAnnual

subscriptionSingle issue

CBI Economic & Business Outlook Quarterly (4 issues) FREE FREE - -

CBI Industrial Trends Survey Full Results Book (4 issues) £285 £75 £495 £130

CBI Industrial Trends Survey (Monthly & Quarterly combined) Full Results Book

(12 issues) £435 £45 £695 £65

CBI Industrial Trends Survey (4 issues) £235 £60 £395 £100

CBI/PricewaterhouseCoopers Financial Services Survey (4 issues) £210 £60 £360 £95

CBI Distributive Trades Survey (12 issues) £385 £30 £460 £45

CBI Service Sector Survey (4 issues) £210 £60 £360 £95

CBI members Non-members


36

The CBI, the UK firm of PricewaterhouseCoopers LLP and each contributor to this work disclaim all responsibility and liability

(including negligence) for loss occasioned to any person acting or refraining from action as a result of any material in this pub-

lication.

DISCLAIMER

The CBI/PwC Financial Services Survey

The CBI and PwC are pleased to present this report of the results of the September 2012 quarterly survey of the health, percep-

tions and plans of the financial services industry.

This survey was launched in December 1989 and draws on the CBI’s considerable expertise in survey analysis. It is one of the

CBI’s regular business trends surveys, standing together with the long established Industrial Trends Survey, the more recent

Distributive Trades Survey and the survey of Consumer, Business and Professional Services launched in 1998.

The survey covers a broad range of financial services activities, including banks, finance houses, securities traders, fund manag-

ers and the insurance industry. It offers a unique and up-to-date insight into the recent trends and future prospects for these

industries.

Modelled on the CBI’s Industrial Trends Survey, the Survey is based on a qualitative rather than quantitative approach. Firms

are asked a number of questions, covering: the trend for the past three months in the value and volume of business, charges,

costs, profits, employment and training; the expected trend in these indicators over the next three months; factors likely to limit

the ability to expand business over the year ahead; whether firms have become more or less optimistic about the situation in

their sector; whether they regard the level of business as above or below ‘normal’; investment intentions over the coming year;

the reasons for such planned expenditure; and the likely constraints on it.

The Survey responses are weighted according to the size of the company and the importance of its activity within the industry.

Responses are treated in absolute confidence, with replies being made anonymously where desired.

The survey results are reported in a similar way to other CBI Surveys and often use the ‘balance’ statistic – the difference be-

tween the percentage of respondents replying ‘more’, ‘above normal’ or ‘up’ minus the percentage replying ‘less’, ‘below nor-

mal’, or ‘down’. The ‘balance’ provides a simplified method of interpreting the results and over a period of time the trend in the

balance gives a good indication of the trend in the economic indicator.

Advising Financial Services Organisations

PricewaterhouseCoopers LLP is proud to support the financial services industry through our involvement with the CBI/

PwC Financial Services Survey. No other survey so comprehensively and immediately identifies the current perceptions

held by the industry and its plans for investment, human resources, marketing and other strategic developments.

PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than

163,000 people in 151 countries in firms across the PwC network share their thinking, experience and solutions to develop

fresh perspectives and practical advice. See pwc.com for more information.

PwC Contact Details

For further information about this Survey, please contact Tina Mayo on (020) 7212 2371 or Katherine Howbrook on (020)

7212 2711. For comment about a particular industry or issue, please contact one of the following people on (020) 7583

5000.

UK Financial Services: Kevin Burrowes Insurance: Mark Stephen

Banking: Kevin Burrowes Investment Management: Paula Smith, Pars Purewal,

Building Societies: Gary Shaw Financial Regulation: Julie Coates

Date post:	02-Aug-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

01 Executive summary · growth is expected to resume next quarter. Income Income from both fees &...

Documents