Private equity activity in the financial services industry is poised to increase as valuations pick up and companies offload non-core assets, according to research released Thursday.

Over the first half of this year private equity funds invested just $4.9 billion in 24 deals, down from $19.2 billion in 89 deals over the same period last year, said Freeman & Co., advisor to the financial services industry.

The largest transactions involved the rescue of U.S. banks such as the $1.3 billion buyout of IndyMac Federal Bank by JC Flowers and Stone Point and the subsequent acquisition of Bank United for $1 billion by Blackstone Group (BX), Carlyle Group and Centerbridge.

"Public company valuations in financial services are off their lows to more realistic levels," said Eric C. Weber managing director of Freeman & Co.

"We expect private equity firms to have ample opportunities as large financial institutions accelerate the sale of non-core assets now that valuations have improved," he added.

Several buyout shops have geared up to take advantage of the disruption in the financial services sector caused by the collapse of Lehman Brothers Holdings Inc. (LEHMQ) and JPMorgan Chase Co.'s (JPM) acquisition of near-failed Bear Stearns last year.

For example, London-based CVC Capital Partners set up set up a new Financial Institutions Group specifically to target the sector and only narrowly lost out in its pursuit of Barclays PLC's (BCS) iShares business earlier this year. Other firms such as Permira have boosted their expertise in the sector with a number of appointments.

-By Marietta Cauchi, Dow Jones Newswires; +44 207 842 9241; marietta.cauchi@dowjones.com