May 8, 2018 / 10:38 AM / 19 days ago

Standard Life Aberdeen challenges Lloyds Banking Group over axed mandate

LONDON (Reuters) - Standard Life Aberdeen (SLA) (SLA.L) has launched a contract dispute process against Lloyds Banking Group (LLOY.L) over the lender’s decision to cancel a 109 billion pound ($147 billion) asset management contract.

FILE PHOTO: A sign is seen outside a branch of Lloyds Bank in central London October 28, 2014. REUTERS/Andrew Winning/File Photo

Britain’s biggest mortgage lender and parent of pensions provider Scottish Widows, told SLA on Feb. 14 that it intended to cancel the mandate at the end of a 12-month notice period, citing competition concerns following the 11 billion pounds merger of Aberdeen Asset Management and Standard Life.

At the time, Lloyds said the combined entity had become a “material competitor” to its wealth and insurance units, and it had started a process to find a new manager for the assets, which mainly comprise of lower margin passive equity and fixed income securities.

SLA said on Tuesday it did not agree that it posed a competition threat to its largest client, and the bank therefore had no right to terminate the asset management agreements.

It said the two sides were “engaging with each other within the framework of the dispute resolution process” envisaged in the contract, without elaborating.

In response, Lloyds said it was “surprised” by SLA’s move and confident in its legal right to terminate the agreement.

“We note and are disappointed by the comments made by Standard Life Aberdeen, particularly in the light of our position as a major customer,” Lloyds said in a statement, adding the contract to manage the assets would have ended “in any event” in March 2022.

“Standard Life Aberdeen is a clear and material competitor of Scottish Widows and Lloyds Banking Group in the UK and to suggest otherwise is not credible.”

Shares in the asset manager were trading 0.2 percent down at 361.4 pence by 0956 GMT, while Lloyds stock was up 0.4 percent.

The annual revenue associated with the asset management contracts represents around 130 million pounds or 4.4 percent of SLA’s full year 2017 pro forma revenue.

SLA said it would provide a further update in due course.

Clients have pulled billions of pounds in assets in the nine months since the union forged one of Europe’s biggest asset managers. The Lloyds mandate represents around 17 percent of SLA’s remaining 646 billion pounds under management.

($1 = 0.7359 pounds)

    Reporting by Sinead Cruise; Editing by Clara Denina and Mark Potter

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