The survey revealed that business volumes grew at their fastest rate since 2007 and the momentum is expected to continue into the coming quarter. Rising volumes helped push up overall profitability, which bounced back after the previous quarter's contraction, and business volumes are predicted to grow strongly again in the next quarter.
Profits rose robustly despite a spike in costs and are expected to grow at a similar rate in the next quarter. But while costs rose at a record pace, this was off-set by a drop in the value of non-performing loans, which fell at the fastest rate since 1996.
Looking ahead, firms say statutory legislation/regulation and competition are likely to be the biggest constraints on business over the coming year, while concerns about level of demand have dropped off sharply.
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Rain Newton-Smith, CBI director for economics, said: "The UK's financial services sector is enjoying its strongest run of growth since 2007, with activity rising across all customer categories and profitability bouncing back.
"The spike in costs was off-set by a steep fall in the value of non-performing loans, suggesting that much of the fall-out from the financial crisis is now working its way out of the system.
"With competition one of the top concerns for the coming year, the sector could be moving to a new phase in the recovery where firms are feeling more assured about the level of demand, and are now shifting their gaze to competing for new customers and business. This is reflected in their expectation that sales to new customers will be the main driver of growth in the coming quarter.
"Worries about the impact of legislation at home and from Europe, such as new capital requirements and the prospect of a financial transaction tax, are also increasingly weighing on the sector.
"However, with strong broad-based growth, financial services firms are relatively upbeat about future prospects, despite some big geo-political risks that remain on the horizon."
Firms saw a return to hiring following last quarter's unexpected fall in headcount, but this is expected to stabilise in the next quarter. Taking into account long-run trends, the latest survey results suggest that employment in financial & insurance activities is forecast to stand a little above 1.152 million by the end of Q4 2014, or 28k higher than at the end of 2013.
Investment intentions are mixed with more spending slated on marketing and information technology for the year ahead, but investment in vehicles, plant and machinery is still due to be scaled back.
Growth in optimism about the overall business situation has been easing since the start of the year, perhaps reflecting uncertainty about the outcome of the Scottish referendum - which fell after the survey period - and the situation in the Middle East and Ukraine.
However, optimism has still risen at an above-average pace.
The survey of 109 firms operating across the sector was carried out between August 18th and September 4th.
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Key findings:
60% of firms said that business volumes were up, while 11% said they were down, giving a balance of +49%, the strongest reading since 2007 (+51%)
Looking ahead to the next quarter, 63% of firms expect business volumes to increase, while 8% say they will decrease, giving a balance of +55%, which is the strongest expectation for growth since June 2010 (+63%)
21% of financial services firms said they felt more optimistic about the overall business situation compared with three months ago, while 7% said they were less optimistic, giving a balance of +14%, compared with +28% in June.
Incomes, costs and profits:
Overall profitability bounced back from the fall last quarter, with 60% reporting a rise, and 8% a fall, giving a balance of +52%, the fastest growth since March 2011 (62%). A similar rate of growth is expected next quarter (+53%).
Income from fees, commissions or premiums fell unexpectedly in the three months to September (-27%) at the fastest rate since March 2009 (-53%). That disappointed expectations of growth (+12%) and fee/commission income is expected to fall again in the coming quarter (-22%)
Income from net interest, investment or trading rose more strongly than expected (+34%) and is predicted to see similar growth in the coming quarter (+35%)
Average spreads remained broadly stable (+4%) with little change expected in the next three months (+2%)
Total operating costs spiked sharply (+53%), raising at the fastest pace since the survey began (in December 1989), which also pushed up average operating costs per transaction sharply (+43% - again, the fastest rise on record).
Employment:
24% of financial services firms said they increased employment, while 7% said that it had decreased, giving a balance of +17%, an improvement on last quarter's unexpected fall (-12%)
Firms expect headcount to stabilise next quarter (+2%).