23rd Oct 2018 15:36
LONDON (Alliance News) - Lloyds Banking Group PLC and Schroders PLC announced Tuesday the pair will enter a "strategic partnership" to create a wealth management firm, that will also see Schroders manage the remaining Scottish Widows assets.
The FTSE 100-listed companies believe the partnership will see Lloyds combine its client base, multi-channel distribution and digital capabilities with Schroders investment and wealth management expertise.
The new wealth management firm will provide financial planning for "affluent customers".
The business will be chaired by Scottish Widows Chief Executive Antonio Lorenzo and Schroders' Co-Head of UK Intermediary James Rainbow will become chief executive.
Lloyds also announced that Schroders will be appointed investment manager of the GBP80 billion Scottish Widows and insurance & wealth related assets. The arrangement is expected to last at least five years.
Lloyds was looking for a new manager for its Scottish Widows portfolio of assets after it announced in February it would terminate its contract with current manager Standard Life Aberdeen PLC, citing "competition concerns" at the time.
Schroders Chief Executive Peter Harrison said: "Wealth management is a strategic priority for Schroders. In combining our award-winning technology and world-class investment expertise with Lloyds' significant client base and digital capabilities, we are creating a strategic partnership which is exclusively focused on the evolving needs of UK savers and investors.
"I am also delighted that we have been entrusted to manage GBP80 billion of assets for Lloyds' and Scottish Widows' clients."
The new wealth management joint venture will see Lloyds taking a 50.1% share with Schroders owning the remaining 49.9%.
Lloyds will transfer GBP13 billion of assets and associated advisers from its existing Wealth Management business to the new joint venture. The companies expect the new firm to start activities by the end of the first half in 2019.
The companies see "significant" growth opportunities in the financial planning and retirement market.
In addition to the creation of a new joint venture and the appointment of Schroders as investment manager for Scottish Widows, Lloyds will take a 19.9% holding of Schroders UK's wealth management business, Cazenove Capital.
Lloyds will transfer about GBP400 million of existing private client assets under management to Schroders UK wealth management business.
"I am delighted to be announcing this exciting partnership with Schroders and the creation of a new market leading wealth management proposition. This provides a strong platform for growth and is a further step in the delivery of our strategic objectives," said Antonio Horta-Osorio, Lloyds chief executive.
Lloyds said it "remains confident" in its rights to terminate its current asset management arrangements and expects the arbitration process to conclude early next year.
The management of GBP676 billion of Scottish Widows assets will begin following the end of the current arbitration process between Lloyds and Standard Life Aberdeen, or by no later than when the existing contract ends in March 2022.
Schroders will manage GBP13 billion of Lloyds' wealth -related assets, and the GBP400 million being transferred to Cazenove, following the conclusion of the arbitration process, regardless of outcome.
Lloyds said the transaction is not expected to have any "material financial impact" on the company in the short term but provides "significant" growth opportunities for its existing GBP50 billion target for additional Financial Planning & Retirement assets under administration by 2020.
Schroders believe the transaction will "enhance" earnings for the company's shareholders in the first year after completion, when one-costs are excluded.
The combined pretax profit for the joint venture and private client assets being transferred is about GBP35 million for 2018, on about GBP130 million income and about GBP95 million costs, with gross assets of about GBP120 million.
Shares in Schroders were down 4.0% Tuesday at 2,654.00 pence each. Lloyds was down 0.4% in afternoon trading at 56.21 pence each.
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