Overall, most firms now consider activity levels only "slightly below" normal, the highest level of confidence recorded since the Northern Rock crisis in 2007, according to Ian McCafferty, chief economic adviser at the CBI. Although activity is still some way below its pre-crisis levels, PwC analysts said that the survey showed the sector was having some success in adjusting its expectations to what they termed the "new normal".
However, uncertainty over coming regulation is a dark cloud on the horizon. Andrew Gray, leader of PwC’s UK banking unit, said these fears were impacting on profitability expectations, as bankers anticipated new regulation would constrain their fixed income businesses, forcing them to “migrate towards more vanilla products that can be put through central clearing.”
Asset managers, however, remained bullish, according to Pars Purewal, UK asset management leader at PwC, despite the fact they were likely to see “more regulation than they have ever faced before”. As long as current profitability levels continued, Purewal said that no extensive cost-cutting was likely at asset management firms.
© Financial News
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