Last week, the American Lawyer announced its eagerly anticipated Am Law 100 rankings, reflecting the financial performance of major law firms in 2013. On the whole, the news wasn’t bad. The elite firms did great, and most other firms eked out “modest, hard-won gains.” Am Law suggested that the big vereins underperformed, but that indictment might have been too harsh.
The Am Law data focuses on last year. What about last quarter? How are law firms doing in 2014 so far?
A new report from Citi Private Bank, a leading provider of financial services to leading law firms, has some answers….
For the first three months of the year, revenue at the surveyed firms grew by 4.3 percent, according to Am Law Daily (via Morning Docket). This reflected a 1 percent rise in demand and a 4.4 percent rise in billable rates — some of the strongest numbers since 2008.
That’s nice. It might have been nicer to see more of that revenue growth driven by demand growth rather than rate growth, but firms are also probably happy to see rate increases actually stick. Perhaps pricing power is starting to shift away from in-house counsel and back towards firms, a reversal of the recent trend.
What about on the expense side? Widespread reports of layoffs and declining legal employment suggest that firms are monitoring expenses closely. This seems to be reflected in the fairly small increase in expenses, just 1.6 percent (divided about evenly between attorney compensation and operating expenses).
Another source of good news: productivity. Overall productivity, measured by hours per lawyer, climbed by 1.1 percent. It grew even faster in certain markets, such as Texas (5.1 percent) and D.C. (3.8 percent).
So that’s the news from the first quarter. While some individual firms are having a rough time of it, as we often discuss in these pages, the vast majority of firms are doing just fine.
Citi Report: First Quarter of 2014 Clears Low Hurdle [Am Law Daily via Morning Docket]