Prosecuted or persecuted? That’s what exasperated European politicians and business leaders are asking as US officials levy ever-bigger fines on the continent’s banks for a range of misdeeds. Most recently, the $9 billion settlement with BNP Paribas for breaking US sanctions drew an angry response from the French establishment, bemoaning “dollar imperialism.”
One group that is (quietly) cheering on each new investigation is London’s largest corporate law firms. Over the past week these firms have been revealing their financial results, and the four biggest firms in the so-called “magic circle“—Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer, and Linklaters—raked in more than £5 billion ($8.6 billion) in the year to April, up 4% from the previous fiscal year (see chart above). Pre-tax profit grew even faster, by nearly 8%, to £2.1 billion. (You have to admire those margins.)
The latest batch of results showed that both revenue and profit grew at all of the magic circle firms for the first time since the financial crisis. (Slaughter and May is not included in these numbers because it does not release financial figures, but by all accounts the smallest, but reportedly most profitable, of the magic circle firms is doing just fine.)
The pickup in mergers, acquisitions, listings and the like has certainly put a spring in the step of lawyers in the global financial capital—many law firms only recently lifted pay freezes imposed several years ago. But another useful, and timely, earner has come from European banks’ seemingly neverending legal woes in the US. Defending these banks against claims related to Libor manipulation is the gift that keeps on giving, and sanctions-busting cases seem set to ensnare plenty more European lenders. For its part, Freshfields specifically mentioned its US dispute practice as a standout performer in its latest financial year.
Profit per partner—a key industry metric—is also rising, putting London’s most prestigious law firms within striking distance of their peak profitability before the global financial crisis. And that’s before cases are settled on dark pools, foreign-exchange trading, and much else besides, which will be sure to keep those billable hours ticking over for months, if not years, to come.
