The pace of growth in the UK financial services sector continued to slow in the three months to September, according to the latest CBI/PwC Financial Services Survey.

In the next quarter, firms expect growth will be slower still and, for the first time in two years, there will be no improvement in profitability. Meanwhile, sentiment has fallen for the first time since March 2009, as firms anticipate more challenging conditions.

Of the 84 financial services firms surveyed, 33% saw business volumes rise in the quarter to September, and 24% reported a fall. The resulting rounded balance of +10% is the lowest since June 2010 (a balance of +9%) and represents a slower rate of growth than the June quarter (+17%).

Both the value of fee, commission and premium income (+15%) and the value of income from net interest, investment and trading (+6%) grew, though at a slightly slower rate than the previous quarter.

The rise in business volumes and income helped push up profitability: 34% of firms reported a rise in profitability and 18% a fall, giving a balance of +16%. That compared with +13% in June.

However, firms expect the pace of growth to slacken in the coming quarter, with business volumes expected to ease (+5%) and profitability to flatten out (-4%). That has weighed heavily on sentiment about the general business situation: a net 20% of firms are less optimistic than three months ago, the first time that confidence has fallen back since March 2009 (-34%).

Ian McCafferty, chief economic adviser, said: “The recovery in the financial services sector is continuing but the pace of growth has slowed compared with earlier in the year.