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Standard Life Aberdeen sees £100bn contract axed | Standard Life Aberdeen sees £100bn contract axed |
(about 17 hours later) | |
Lloyds Banking Group and Scottish Widows have ended a £100bn asset management contract with recently-merged Standard Life Aberdeen. | Lloyds Banking Group and Scottish Widows have ended a £100bn asset management contract with recently-merged Standard Life Aberdeen. |
They said last year's merger between Standard Life and Aberdeen Asset Management created competition issues. | They said last year's merger between Standard Life and Aberdeen Asset Management created competition issues. |
Keith Skeoch and Martin Gilbert, chief executives of Standard Life Aberdeen (SLA), said they were "disappointed". | Keith Skeoch and Martin Gilbert, chief executives of Standard Life Aberdeen (SLA), said they were "disappointed". |
But SLA said, despite the size of the contract, it represented less than 5% of its 2017 revenues. | But SLA said, despite the size of the contract, it represented less than 5% of its 2017 revenues. |
Shares in Standard Life Aberdeen dropped as much as 10% for a time after the announcement, before settling about 5% lower. | Shares in Standard Life Aberdeen dropped as much as 10% for a time after the announcement, before settling about 5% lower. |
The deal to manage the £109bn of assets was first taken on by Aberdeen Asset Management in 2014 when it bought Scottish Widows Investment Partnership (SWIP) from Lloyds. | The deal to manage the £109bn of assets was first taken on by Aberdeen Asset Management in 2014 when it bought Scottish Widows Investment Partnership (SWIP) from Lloyds. |
But there was a clause allowing Lloyds to end the mandate if Aberdeen merged with a competitor. | But there was a clause allowing Lloyds to end the mandate if Aberdeen merged with a competitor. |
This was triggered by last summer's £11bn tie-up between Standard Life and Aberdeen Asset Management, creating Europe's second-biggest fund manager. | This was triggered by last summer's £11bn tie-up between Standard Life and Aberdeen Asset Management, creating Europe's second-biggest fund manager. |
Analysis by Douglas Fraser, BBC Scotland business and economy editor | Analysis by Douglas Fraser, BBC Scotland business and economy editor |
It's reckoned that more than a trillion pounds of investment funds are now managed out of Edinburgh, which is quite a vote of confidence from those who trust asset managers with their moola. | It's reckoned that more than a trillion pounds of investment funds are now managed out of Edinburgh, which is quite a vote of confidence from those who trust asset managers with their moola. |
Roughly two-thirds of that has been at the newly-merged Standard Life Aberdeen, last September managing £648bn. | |
For those who see Scotland's financial world as a wee bit too cosy, this Scottish Widows announcement proves that relationships within this asset management community can get quite rocky. | For those who see Scotland's financial world as a wee bit too cosy, this Scottish Widows announcement proves that relationships within this asset management community can get quite rocky. |
Read more from Douglas | Read more from Douglas |
Material competitor | Material competitor |
The decision to end the deal means SLA will take a one-off impairment charge of £40m. | The decision to end the deal means SLA will take a one-off impairment charge of £40m. |
Antonio Lorenzo, chief executive of Scottish Widows and group director of insurance and wealth at Lloyds, said the merger meant its assets were being "managed by a material competitor". | Antonio Lorenzo, chief executive of Scottish Widows and group director of insurance and wealth at Lloyds, said the merger meant its assets were being "managed by a material competitor". |
He said it was "now appropriate to review our long-term asset management arrangements". | He said it was "now appropriate to review our long-term asset management arrangements". |
The investment management deal will end after a 12-month notice period. | The investment management deal will end after a 12-month notice period. |
Laith Khalaf, senior analyst at Hargreaves Lansdown, said it was a "blow" for Standard Life Aberdeen. | Laith Khalaf, senior analyst at Hargreaves Lansdown, said it was a "blow" for Standard Life Aberdeen. |
He added: "Losing this book of business would strike a sour note for the Standard Life Aberdeen merger, and undermines some of the rationale for joining forces, which was built on scale. | He added: "Losing this book of business would strike a sour note for the Standard Life Aberdeen merger, and undermines some of the rationale for joining forces, which was built on scale. |
"However, while almost 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." | "However, while almost 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." |
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