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Signs are pointing to another healthy year for law firm revenue, even if 2019 isn't on track to match last year's performance, according to a new report from Wells Fargo Legal Specialty Group.

Surveying 123 firms, Wells Fargo found that revenue grew 6.3% in the first nine months of this year, marking an improvement from midyear figures. That's roughly on track with what Citi Private Bank's Law Firm Group found with its own report, released earlier this month.

"This year is shaping up to be a very, very good year for the industry, just not as good as what the industry experienced last year," said Joe Mendola, the legal specialty group's senior director of sales.

Eighty-five percent of the firms Wells Fargo surveyed told the bank they anticipate meeting or exceeding their 2019 expectations for revenue, net income and the number of hours logged.

Although revenue, demand and rates have grown across the industry, Wells Fargo found that law firms at the top of the Am Law 200 grew faster across those three metrics than those clustered at the bottom. Industrywide, demand grew by 2.8%—a drop compared to last year's 3.3%—and rates increased by 4.4%.

Firms within the Am Law 50 saw their revenue grow by 7.3%, with 36% percent of those firms projecting revenue increase of 10% or more. Their demand was up 3.4%, while "rate increases were greatest for the largest firms in the Am Law 1-50, consistent with historical trends," Wells Fargo found.

By contrast, Am Law law firms ranked  51 to 100 and 101 to 200 saw revenue grow by 5.5% and 3.2%, respectively. Only 20% of the firms on the Am Law 200 are anticipating revenue growth of 10% or more, while 13% of them are projecting their revenues to drop by 5% or more. Demand for firms ranked 51 to 100 and 101 to 200 grew by 2.2% and 1.7%, respectively, both of which are below the industry average.

"There's no question we're seeing greater stratification," Mendola said. One potential cause of the stratification is that, right now, transactional work is a particular revenue driver, and some of those deals require the services of large law firms with international footprints, he added.

Wells Fargo is anticipating a "relatively healthy" 2020 for law firms even as the institution is expecting a slowdown in U.S. GDP growth and ongoing geopolitical uncertainty.

They're not the only ones—in-house legal departments have said they've already begun to cut back on their total law department spending in anticipation of an economic recession within the next two years. And Big Law's newest partners have relayed to ALM Media that they're worried their firms are not prepared a recession.

But Wells Fargo noted that "most firms have healthy balance sheets and access to financing and are well positioned to weather a downturn and/or take advantage of opportunities or potential dislocations should they arise." Law firms are also planning to raise their rates by 5.5% next year.

"Frankly, [the legal industry] has handled a little bit of slowdown in the economy better than other industries," Mendola said.

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