The Confederation of British Industry has revealed the UK's financial services firms have seen their fastest period of growth since 2007 with a bounce in profitability and hiring on the up.
Financial firms' business volumes grew in the three months to September after something of a contraction the previous quarter, and this momentum is expected to continue into the next one, according to the 100th CBI/PricewaterhouseCoopers survey.
The survey of 109 financial firms found 60% of them said business volumes were up, while 11% said they were down; 60% reported a rise in profits, and 8% reported a fall.
A spike in costs, which rose at a record pace of 53%, was off-set by a drop in the value of non-performing loans, which fell at the fastest rate since 1996.
The chief worry among firms has become extra regulation and competition; concerns about level of demand have dropped off sharply.
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."
The impact of legislation at home and from Europe, such as new capital requirements and the prospect of a financial transaction tax, remain a concern. Meanwhile, competition is expected to come from new entrants to the market using digital technology that is not encumbered by legacy systems.
Kevin Burrowes, UK financial services leader at PwC, said: "There is an increasing focus on new services and technology-enabled growth. Time will tell if established banks are underestimating their need for digital capabilities as we see a continued influx of new entrants without the chains of legacy systems, meaning that tougher competition is an increasing concern.
"There are hints of a new 'war for talent' and tighter monetary policy in 2015 could also pose a challenge."
Firms saw a return to hiring following last quarter's unexpected fall in headcount. Some 24% of financial services firms said they increased employment, while 7% said that it had decreased.
Employment in financial & insurance activities is forecast to stand a little above 1.152m by the end of the fourth quarter this year, or 28,000 higher than at the end of 2013, said the survey.