Unlike their corporate brethren, finance lawyers have to face the difficult concept of commoditisation. 2003-04 saw a series of bank panel reviews, all with the explicit rationale that the lenders should save on external legal spend. Those panel reviews saw the usual suspects win out (with the exception of Lovells on RBS), but all the major banking firms are now having to wrestle with the problem of how to turn a profit on a product the banks want as commoditised as possible.

The answer, say all banking heads, is to keep innovating and keep working at your lender relationships. Writing off fees on aborts is one thing, as long as you know you’re going to get the next deal – although it’s worth pointing out that three bankers volunteer that Allen & Overy (A&O) is less keen than its competitors to do this. Meanwhile, most firms are expecting their finance partners to cut out the fat.

Headcount figures are notoriously difficult to collate, but statistics provided by Clifford Chance suggest that its total number of banking and capital markets partners actually dropped by 10 over the course of the year. But Clifford Chance had a decent 12 months considering that 2001-02 was its record year, when the banking group recorded £212m in global revenues. In 2002-03 it struggled to maintain those figures. A Herculean effort saw the banking department just about match turnover, while capital markets slipped badly to £96.5m from £112m.

In 2003-04 Clifford Chance saw an overall recovery in finance after a very difficult first six months. Following an explosive final quarter, the banking group, led by Mark Campbell, managed £210m – an average of £1.57m per partner, with billings in bank lending and acquisition finance reaching some £55m, projects £37m and restructuring £43m. Meanwhile, David Dunnigan’s capital markets group – which in the US includes equity capital markets, unlike in the UK – climbed back another 10.8 per cent to £107m, or £1.4m per partner.

Clifford Chance’s bedrock practices in London and Germany were still solid, with London contributing £92m. In fact, overall it was a creditable performance given the difficult times experienced by the projects group. Traditionally one of the more profitable areas for Clifford Chance, the pricing in the projects market has become famously difficult – something that is starting to afflict all the big finance firms – but this did not stop the projects group clearing nearly £37m in billings.

Clifford Chance’s best performance was in leveraged finance, where it cleaned up. Goldman Sachs, Credit Suisse First Boston (CSFB), Royal Bank of Scotland (RBS) and JPMorgan Chase were the mainstays, while German deals, such as Brenntag and MTU, kept the coffers full.

In capital markets, David Dunnigan’s group had a strong year across the board. London accounted for £52m of the £107m, with the New York structured finance practice also coming good – Germany and France will need attention. Meanwhile, Kevin Ingram’s securitisation group still enjoys the biggest market share in the City. There was plenty of programme work for banks, but the sexy whole business securitisations, which have made up a large part of Clifford Chance’s more esoteric practice, have started to dry up.

Whereas Clifford Chance’s banking results were essentially static, A&O reported increased revenues of 10 per cent, to £206.5m. An increase in banking billings was not echoed by the international capital markets practice, which dropped a touch from £101m to £100.4m. The banking department has traditionally been split into broadly equal groups of global loans, leveraged finance, restructuring and projects, but the burgeoning asset finance group is now a standalone practice within banking. In response to the pressures within the projects market, A&O has had to reconfigure its staffing slightly for that business line; leverage ratios are now much lower than in the global loans group, for example.

That global loans group, led by Mike Duncan, went great guns in 2003-04, with anecdotal evidence showing that it made big inroads into Citibank and Barclays. However, the leveraged finance performance was patchier. Yes, A&O’s combined global loans and leveraged finance groups have together doubled in revenues over four years, but that has not translated into a massive gain in market share on the leveraged side, despite hiring the Norton Rose quartet two years ago. Part of this is the luck of the draw, but 2003-04 saw A&O beaten to several mandates by arch-rival Clifford Chance. A&O came out fighting for JPMorgan Chase on the Weetabix/Hicks Muse Tate & Furst deal, but Clifford Chance has assiduously cultivated the leveraged teams in JPMorgan Chase and RBS to considerable effect.

It seems that what two bankers describe as its aggressively pro-bank positioning has been counter-productive when it comes to sponsor-driven deals. And A&O’s reputation for high fees may not work in the firm’s favour. Restructuring, especially in the energy sector, has powered the group’s overall fees; the year after it raked in £33m on Marconi, A&O charged £10m on Drax and £2.5m on Invensys. More worryingly, several bankers are starting to grumble about A&O’s perceived rigidity on billing and overstaffing.

Giles White’s finance group at Linklaters edged its revenues up 3.22 per cent from £223.2m to £230.4m. The banking side, led by John Tucker, represented half the finance total with revenues of £115m. Some of the biggest growth came from leveraged finance, with a series of acquisition finance mandates for the likes of ABN Amro, CSFB, RBS and Barclays Capital. The leveraged group is still small, but the hire of Stephen Lucas, a rising star from Clifford Chance, boosted partner numbers last year. International gas and energy projects remained solid, with a strong performance from Russia, where Linklaters is dominant in this sector; it advised on Sakhalin II and in early 2004 won the work for Gazprom’s gas pipeline project. Nick Eastwell’s capital markets group grossed £115m, with some £60m of that generated in London. Linklaters’ traditional dominance in capital markets was reflected in its stellar revenue figures of £2.25m per partner.

After a few years in the doldrums, Freshfields Bruckhaus Deringer brought in £168m, having posted an 11 per cent increase in turnover across the board – largely due to London and Germany coming good. The UK, Germany and France account for £134m, or 80 per cent, of the finance total, while £84m was generated from London, making a stunning revenue per partner of £1.8m compared to a global finance average of £1.6m. The best performing groups were structured finance (especially London) and banking (especially Germany).

Structured finance and securitisation has always been Freshfields’ strong suit; Barclays Capital kept the firm busy on various deals such as Gracechurch Life Finance in the life insurance sector and Northern Rock’s E10bn covered bond; other work included Fifa’s cancellation bond for CSFB, to refinancing existing securitisations for Punch, plus a role on the ambitious Khronos deal.

Freshfields’ restructuring and insolvency practice is still small in terms of dedicated partner numbers, but the transactions were meaty, pulling in partners from various parts of the firm. On the borrower side, Invensys was the stand-out deal, but bank-side deals included acting for the lead lenders on Alstom in Paris and advising Lehman Brothers on the Meridien Hotels saga. Also notable was Air Canada’s insolvency and restructuring of the financing of 38 Airbus aircraft. The latter deal confirmed Freshfields’ huge presence in the asset finance field, despite inexplicably losing out on the export credit agencies legal panel this summer.

As The Lawyer reported last year, Freshfields’ traditional reluctance to put strategic muscle behind its finance practice was dispelled by external consultants McKinsey. Much to the relief of Freshfields’ neglected finance lawyers, McKinsey recommended that the firm should pursue more opportunities with commercial banks and this is in contrast with its usual constituency of investment banks. Freshfields has a classy borrower practice, but still lacks a market-facing debt business, That said, getting onto the RBS panel was a coup, especially after it lost its lead corporate advisory spot to Linklaters in 2003. The hire of Linklaters associate Chris Howard straight into equity underlined Freshfields’ new direction.

The acquisition finance practice at Norton Rose essentially gave up the ghost in 2003, with the departure of leveraged specialist Tom Speechley for Macfarlanes, but in asset finance and projects Jeff Barratt’s group turned in a sparkling set of figures. Overall, the finance department grossed £67.6m, at £1.25m per partner. Inevitably, London accounted for the meat of the practice, with its 33 partners bringing in £48.5m, or £1.5m per partner. A balanced asset finance business across shipping, aircraft and rail has helped; shipping and aircraft finance account for some £17m alone. Meanwhile, projects – particularly in the energy sector – has delivered consistent recovery rates over the past five years, as Norton Rose’s practice has shifted away from its lender bias to a 50-50 split between banks and sponsors. The standout power sector deal was the Drax restructuring, where Norton Rose gained plaudits for its work.

Slaughter and May’s finance practice, led by Andrew Balfour, is configured rather differently from many other firms. There was, of course, plenty of borrower work, but it had a decent showing in structured finance, capital markets, projects and asset finance. Restructuring for borrowers was another growing area and helped fuel the average revenue per partner figure of £1.6m.

Simmons & Simmons sustained its strong finance performance in 2003-04. In 2002-03 it was the firm’s most profitable department in London, with average profit per equity partner of £450,000 compared with a firmwide figure of £300,000. With the bottom line under control, Mark Dawkins’ group increased its top line this year by 20 per cent, from £44.2m to £53m. (However, it should be noted that Simmons includes a six-partner financial and institutional litigation group and a two-partner wealth management team within its figures.) Average revenue per partner rose from £736,000 to £930,000. Despite hiring six partners during the course of the year, the total partner figure dropped from 60 to 57. Financial services and asset management work, along with capital markets and a solid repackaging practice, powered most of Simmons’ turnover rise in finance.

Perhaps understandably, Lovells was unable to match its 35 per cent growth spurt of 2002-03, managing a 4 per cent overall increase to £98m. Some £50m of that was generated in London, although Tokyo, Moscow and Paris also had strong years, particularly in capital markets. Indeed, capital markets – nearly 80 per cent of which is securitisation and repackaging – saw the biggest increase, though from a lower base; it grew by 12 per cent. Acquisition finance performed well in London, helped by a robust leverage ratio of 5:1, although not getting on the RBS panel was a setback. Meanwhile, projects, which saw a massive hike in 2002-03, increased its revenues by 5 per cent, helped along by Skynet and Tubelines.

Denton Wilde Sapte had a strong year, leaping 13 per cent from £35.4m to £40m, with a creditable £1m per partner (or £1.3m per equity partner). These figures do not include project finance work for sponsors, which is located in the energy department and accounts for the lion’s share of the firm’s projects business. Bank-led projects work totalled some £6m, with the biggest growth area in the Middle East and Africa.

A solid performance from the asset finance division, particularly in aviation, brought in revenues of some £8m. That figure was matched by the workouts practice, which had a strong year and also brought in £8m. Trade finance – where Dentons has always been strong, but has been suffering from difficult pricing conditions – grossed some £5m, although that group’s profitability has been bolstered by a high leverage ratio. There were also green shoots in the acquisition finance business, after several difficult years, with Chris Fanner’s team benefiting from A&O’s conflicts on Safeway to land the ABN Amro mandate. That retail flavour was evident again on the Selfridges deal, for Royal Bank of Canada.

CMS Cameron McKenna’s practice dipped slightly from last year’s figure of £34.8m to £33m, but Metronet was clearly not just a one-off. It maintained a strong position in major PPP and infrastructure work, including the NATS restructuring.

The finance practice at Ashurst just did not stop growing in 2003-04, soaring by 21.2 per cent from £32.5m to £39.4m. Nigel Ward’s leveraged team was everywhere, from Seat to Focus Wickes, and brought in nearly £20m. Erica Handling’s structured finance group also had a stellar year, grossing some £13m. Ashurst’s sponsor-focused PFI practice handled some meaty domestic deals last year, such as Colchester Garrison, and turned over nearly £6m.

Herbert Smith showed a marginal growth, from £21m to £21.9m. Clive Barnard’s group did well in getting on the RBS and Société Générale panel. The joint finance desk with ally Stibbe has a whiff of hype to it; the bigger question is why there is no similar initiative with Herbert Smith’s German ally Gleiss Lutz. However, Herbert Smith has undoubtedly made steady progress with financial institutions; work from them, as opposed to sponsors or borrowers, has gone up by 50 per cent in the last couple of years.

Just missing the top 15 is Stephenson Harwood, whose finance practice turned over £16.4m, or £781,000 revenue per partner. The bulk of the business came from aircraft and ship finance, plus a strong streak of financial regulation.