Wednesday, 26 September, 2018

Standard Life Aberdeen hit as biggest client Lloyds pulls plug

Standard Life and Aberdeen Asset Management merger Standard Life Aberdeen hit as biggest client Lloyds pulls plug
Nellie Chapman | 16 February, 2018, 06:19

Scottish Widows chief executive Antonio Lorenzo said it meant the assets were "being managed by a material competitor", adding that it was "now appropriate to review our long-term asset management arrangements".

The decision relates to investments run by Aberdeen Asset Management on behalf of Scottish Widows customers.

The FT adds that the Scottish Widows contract represented nearly 17% of Standard Life Aberdeen's £646bn (€728bn) of total assets under management.

They added that they would be discussing the implications of the decision with both Scottish Widows and Lloyds.

A United Kingdom pension fund and its parent bank have terminated about $200 billion in respective mandates with a major global asset manager.

David McCann, a research analyst at brokerage business Numis, said the fee margin on the Scottish Widows mandate is in the region of 0.14 per cent while the average fee margin across Standard Life Aberdeen's other work is 0.34 per cent. However, while nearly a fifth of Standard Life Aberdeen's assets look like they might be walking out the door, this only equates to 5% of revenues, as these investment services are relatively low margin.

Standard Life Aberdeen PLC (LON:SLA) has earned an average recommendation of "Buy" from the eleven ratings firms that are now covering the company, MarketBeat Ratings reports.

The potential loss of the contract was flagged in the deal's "risk factors" but the Lloyds announcement came as a surprise. The Lloyds contract represented a third of Aberdeen's assets.

The bank is launching its three-year strategy next week. "However, 12 months doesn't give the bank a great deal of time to pull off such a big u-turn, having sold SWIP to Aberdeen only a few years ago, so this doesn't look like a serious prospect for the time being".

Standard Life Aberdeen's shares traded 16 pence lower at 410.80p, a 3.75% decline, in mid-morning trade.

The company, which completed the merger in August, suffered large redemptions by investors that made it one of Europe's worst-selling asset management houses in 2017.

The fund group's shares were rattled following the news, sinking more than 5% as trading began on Thursday. However, losing a further £109bn having been crowned the worst-selling European-headquartered asset manager in the first nine months of 2017 isn't exactly a vote of confidence in what was supposed to be a dynamic merger for the United Kingdom fund management industry.

Meanwhile, Scottish Widows has been expanding in corporate pensions and parent Lloyds also has broader ambitions in insurance after buying Zurich Insurance's United Kingdom workplace pensions and savings business in October.