The majority of the UK's financial institutions expect the impact of the current credit crunch to last for most of the year, but has yet to hurt profits.

The latest financial services survey from the CBI and PricewaterhouseCoopers also asked some one-off questions about the current credit market conditions and received largely gloomy responses. Seven out of ten respondents felt that 'normal' market conditions would not return for at least six months.

Business optimism was also hard to come, especially among building societies, while volumes fell at their sharpest since 1991. Profitability, however, was still growing, although many do not expect this to continue in the coming months.

'The financial services industry is concerned about the lasting implications of the credit squeeze and how long these ripples will be felt,' said Andrew Gray, banking partner at PwC. 'Although results have revealed that 70% of respondents fell that it will take at least six months for market conditions to return to normal level, this will be dependent on the health of corporates and on how current market conditions spread beyond financial services.'

Further reading:

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BDO: FDs uncertain in current credit crunch