Fides Weekly Update – 24th February 2017

Welcome back to the Fides Weekly Update. Read on for our analysis of the top legal and compliance new stories of the week. You can also scroll down to see our regular feature: Movers & Shakers of the week.

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This week:


Britain’s major banks were in the spotlight this week as they unveiled their full-year financial results. As such, this week we take a deep dive into the financial results of two of the UK’s Clearing banks, and what they reveal about the health of UK banking.

Lloyds Banking Group

The outlook was brighter at Lloyds Banking Group that doubled its pre-tax profits from 2015 and reported its highest annual profit in a decade. The banks’ pre-tax profits increased by 158% to £4.24bn, a level last seen in 2006 before the financial crisis.

Following the results, the government has since reduced its stake in the bank to 3.89%, down from an initial 43% following the bailout in 2008. At this current sell down rate, Lloyds should be fully returned to private ownership by May. Lloyds share price also rose by 3.6% on Wednesday, making the bank the biggest riser on the FTSE 100.

A reason for this boost in profitability is a decline in the amount the bank paid out for PPI provisions, from £4bn in 2015 to £1bn last year. Profits at the bank had been weighed down in recent years by the £50bn cost of bad lending at HBOS – the bank Lloyds took over during the 2008 financial crisis – and £17bn of charges to cover PPI compensation.

Despite this, the bank still set aside a further £1bn for conduct issues, which has affected underlying profits, which were down to £7.9bn from £8.1bn last year. Total income for the group also edged down to £17.5bn compared with £17.6bn the previous year, showing how difficult it is for banks to make money when interest rates are so low.

The overall picture however is one of robust recovery for Lloyds, whose share price has increased 21% over the past six months after plummeting to 48p following the referendum result. The bank also stands in stark contrast to fellow bailed out lender Royal Bank of Scotland, which on Friday is due to post its ninth consecutive annual loss, has not resumed dividend payments, and is still 72% owned by the taxpayer.

However, with 97% of business generated by the UK economy, the possible downturn resulting from Britain’s decision to leave the European Union is a predominant concern for Lloyds.


On Thursday, Barclays also reported that its annual profits in 2016 had almost tripled, achieving 182% growth to reach a pre-tax profit of £3.2m.

This is the result of the bank’s strong progress on its restructuring and the run-down of non-core assets, which has included the sale of its Africa business, as well as the dramatic fall in the amount set aside to cover litigation costs from £4.3bn to £1.3bn after seeing more than 20 billion pounds of profit erased by fines and settlements in the previous five years.

In spite of this, the performance of core UK and international divisions was somewhat underwhelming, with underlying profits falling back slightly and revenue dropping three per cent to £21.5bn. Impairment charges for bad debts rose also 35% to £2.3bn.

There also remain some legacy litigation issues yet to be resolved, with the bank yet to settle with US authorities after rejecting an offer to settle a mis-selling claim for mortgage backed securities at the end of last year. Barclays are also awaiting the outcome of an investigation by the UK’s Serious Fraud Office into the way it raised funds during the height of the banking crisis.

Barclays also needs to better mitigate the risk of the UK’s exit from the EU, especially with the size of its investment bank. Whilst the majority of staff are expected to remain in London, changes to the bank’s legal structure, including making Dublin the headquarters of its European business, may be necessary in the coming year.


US law firms have continued to post strong financial results this week, with Latham & Watkins, Sidley Austin, Sherman and Sterling and Quinn Emmanuel all reporting strong financial performances in 2016.

Revenue at Latham & Watkins increased 6.5% to $2.823bn (£2.26bn), marking its seventh consecutive year of top line growth and the most revenue ever generated by a law firm in a single financial year.

Net profit also jumped 8% to $1.424bn (£1.14bn), with profit per equity partner rising 5.3% to break $3m for the first time in the firm’s history. Revenue per lawyer (RPL) also rose 1.9% last year to $1.238m (£990,000).

This comes in a period of meteoric growth for the firm, which despite the general contraction of the market for high-end legal services, has managed to increase its revenue by 55% over the last seven years. It is now the world’s largest law firm by revenue, overtaking both Baker McKenzie and DLA Piper, and looks likely to retain that title this year.

All of Latham’s practices and industry groups saw increased demand last year, especially litigation and disputes which equates to one third of the firm’s business, whilst the M&A and banking practices also grew their revenue by 15% respectively.

As a result, the firm has continued to expand aggressively, opening a new office in South Korea and making 26 lateral partner hires globally, 10 of which were in London.

Sidley Austin posted healthy gains in 2016, with revenue climbing 3.4% to $1.928bn (£1.55bn). Profits per equity partner rose to $2.13m (£1.71m), an increase of 3.1%, while revenue per lawyer held steady at $1.05m (£843,000).

Growth attributed to new offices and the performance of certain practice areas over the past few years, with the demand for litigation (5%) and transactional practices (3-4%) up, as the firm made investment into its private equity practice.

Sherman and Sterling also saw revenue rise 6% to $912.5m (£731m), boosted by strong performances in M&A, international arbitration, asset management, real estate and project finance. London revenues rose by 14% to $169.7m (£136m), a 63% increase in revenue since 2010.

Correspondingly, revenue per lawyer rose 5.9% to $1.085m (£870,000), as total headcount stayed steady at 840 lawyers last year, including 187 in London.

Meanwhile, the stunning leap in profits per equity partner (PEP), up 18% to $2.165m (£1.74m), came as the firm’s total equity partner ranks decreased by 22 to 140, its smallest number in recent years

Despite the jump in partner profits, net income rose just 1.5% to $302m (£242m) last year. Condon confirmed that increasing associate compensation was a factor in keeping net income growth down. “Rising associate salaries were unbudgeted by all law firms,” he noted.

And while Shearman has been frequently selected as litigation counsel for banking clients in recent years, he said, financial institutional litigation may begin to slow down. The firm is focusing on growing its docket of corporate client base litigation to counteract a decrease in litigation and investigations for financial institutions, said senior partner Creighton Condon.

The ever expanding Quinn Emanuel Urquhart & Sullivan saw a 21% spike in its London revenue for 2016 reaching £44.8m while London net profit sat at £32.8m.

The results come after the London office managed a 41% increase to £36.9m last year, up from a 33% increase in 2014 which saw City revenues sitting at £26.2m.

It’s been a busy year for Quinn which welcomed four new City based partners last year. The office launched both a long awaited corporate crime practice with Covington & Burling partner and former Serious Fraud Office prosecutor Robert Amaee and a UK construction disputes practice with Herbert Smith Freehills’ James Bremen.

However the firm lost partner Martin Davies to Latham & Watkins last month, the first lateral hire to leave the London office in around nine years.



A&O takes three-partner Paul Hastings team finance team in New York

Allen & Overy (A&O) has continued its US hiring spree with the recruitment of a three-partner finance and securities team from Paul Hastings in New York, including former leveraged finance head Bill Schwitter.

DLA Piper loses two partners to boutique pensions firm

Kate Payne and Vikki Massarano are joining ARC Pensions Law to establish its first regional office in Leeds

Freshfields loses entire Paris real estate team to Jones Day

Real estate head Erwan Le Douce-Bercot leaves for Jones Day along with a three-lawyer team in Paris.

London Arbitration specialist Wendy Miles QC moves to US rival Debevoise & Plimpton

Two and a half years after joining the London office of Boies Schiller, Miles joins US rival Debevoise & Plimpton

Nine partner Norton Rose energy team leaves for Baker Botts in Houston

This includes David Peterman, the head of Norton Rose Fulbright’s US M&A and securities practice; Robert Phillpott, the former head of the firm’s US tax practice; and Efren Acosta, the former head of its Houston corporate, M&A and securities practices.

Orrick hires four-lawyer team from Clifford Chance in Paris

Orrick Herrington & Sutcliffe has hired four lawyers from Clifford Chance in Paris including local competition head Patrick Hubert.

Ashurst Hong Kong exits continue as project finance partner joins DLA Piper

Ashurst has seen another departure from its Hong Kong office, with project finance partner Matthias Schemuth leaving for DLA Piper.


Burges Salmon appoints new senior partner

Employment partner Chris Seaton has been employed as senior partner, taking over the role from Alan Barr, who has served as senior partner of the firm for the last six years

New Chairman appointed at Watson Farley Williams

Watson Farley has appointed London shipping partner Nigel Thomas as its new chairman, replacing Frank Dunne, who has held the role since 2004.

Office Openings & Closings

Allen & Overy and Baker McKenzie invest in Northern Ireland legal innovation centre

Fieldfisher opens five-partner Amsterdam office

Mergers & Acquisitions

Norton Rose Fulbright agrees combination with Chadbourne & Parke

Norton Rose Fulbright has confirmed that it is to merge with Chadbourne & Parke in a deal that creates a firm with combined revenues of just under $2bn (£1.61bn).

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