Stan Life Aberdeen wins £100bn Lloyds asset case

UPDATE 4 — Edinburgh-based investment giant Standard Life Aberdeen (SLA) said on Tuesday it won a legal dispute to stop Scottish Widows parent Lloyds Banking Group (LBG) cancelling a £100 billion investment management contract early.

A tribunal has ruled that LBG didn’t have the right to terminate the £100 billion fund management contract with Standard Life Aberdeen.

What happens now is unclear, but some analysts said the legal decision could cost Lloyds hundreds of millions of pounds in extra fees.

Some of the analysts predicted the decision would not result in SLA keeping the assets — but would give SLA a strong hand in seeking compensation for ending the contract three years ahead of schedule.

Others said the decision could mean Lloyds will be locked into the contract until March 2022 when it expires, or it could pay a big fee to break the deal early. 

“Standard Life Aberdeen plc announces that the arbitral tribunal established in respect of the dispute between the company and Lloyds Banking Group / Scottish Widows (LBG) has ruled in favour of the company,” said SLA.

“In particular, the arbitral tribunal has ruled that LBG was not entitled to give notice, on 14 February 2018, to terminate the investment management agreements in respect of assets managed by members of the Standard Life Aberdeen group.

“The company is carefully considering the terms of the decision and appropriate next steps. 

“In the meantime, the company will continue to manage the assets in the best interests of LBG’s customers.

“As at 31 December 2018, the value of the assets under management in respect of these arrangements was c£100bn, and no material amount of assets has since been withdrawn.”

Standard Life Aberdeen CEO Keith Skeoch said: “Now that the arbitration panel has ruled in our favour, we will carefully consider our next steps, working constructively with LBG to bring the matter to resolution.”

A spokesman for Scottish Widows said: “We are disappointed with the decision of the arbitration tribunal, and will look to discuss its outcome with Standard Life Aberdeen.”

Scottish Widows maintained: “We will discuss starting the process of an orderly transfer of assets to our new partners, BlackRock and Schroders.

“We will continue to work closely with Standard Life Aberdeen to ensure there is no disruption to performance or service.”

Hargreaves Lansdown analyst Laith Khalaf said: “This is a big victory for Standard Life Aberdeen, and a serious setback for Lloyds’ new foray into wealth management …

“… it’s clearly a large sum of money, and against a backdrop of fund outflows, will be particularly well-received.”

KBW analyst Edward Firth said in a note to clients: “The ruling does not allow any right of appeal.

“We would expect Lloyds to have to pay compensation.

“This is likely to be in the order of around £300 million.”