UK financial firm optimism highest for 17 yrs -CBI

* Optimism among UK financials highest since 1996 -CBI/PwC

* Firms added about 10,000 financial jobs in Q3

* Business volumes down in Q3, expected to rise in Q4

LONDON, Oct 7 (Reuters) - Britain's banks and otherfinancial firms are at their most optimistic for almost 17years, according to an industry survey.

Some 59 percent of UK financial services firms said theyfelt more optimistic about their business situation, compared to6 percent who were less optimistic, according to the latestquarterly CBI/PwC financial services survey, released on Monday.The positive balance of 53 is the highest since December 1996.

The survey, covering the three months to early September,also showed a net 24 percent of financial firms increased staffin the period, the biggest rise for six years.

A net 14 percent of firms expect to increase staffing againin the current quarter.

The CBI/PwC survey is based on the balance of firmsreporting an increase and those reporting a decrease. The surveyfindings indicate about 10,000 jobs were added in the thirdquarter and another 2,000 will be created this quarter, takingUK financial services jobs to 1.14 million, CBI/PwC estimated.

Business volumes fell in the latest quarter, however, mainlyin banking. The CBI said 22 percent of financial firms reporteda rise in business volumes, but 32 percent said they were down.A big majority of firms expect volumes to increase this quarter,it said.

"Banks' optimism is increasingly buoyant despite seeing aslight seasonal blip in commercial and industrial volumes.Activity and profitability are expected to grow as the economyrecovers, and investment in new products and infrastructure isincreasing," said Kevin Burrowes, PwC's UK financial servicesleader.

Profitability rose for the fourth consecutive quarter, ascompanies managed to offset the fall in business volumes byincreasing their margins, the survey showed. With costs expectedto fall, profitability should increase further in the currentquarter, firms said.