Standard Life Aberdeen reels as Lloyds pulls plug

● Mandate to run £109bn of assets for Lloyds and Scottish Widows withdrawn

The merger of Standard Life and Aberdeen Asset Management was dealt a big blow yesterday when the group lost a mandate to run £109 billion of assets for Lloyds Bank and Scottish Widows.

It is understood Lloyds felt the relationship was unsustainable given that the money would now be partly managed by Standard Life, a clear rival to Scottish Widows in the life and pensions market.

Shares in Standard Life Aberdeen, headquartered like Widows in Edinburgh, slumped 7.5 per cent on the impending loss of 17 per cent of its £646bn of funds under management and 5 per cent of its 2017 revenues.

Aberdeen took on the deal to manage the assets when it bought Scottish Life Investment Partnership from Lloyds in 2014.

But there was a clause allowing Lloyds to end the mandate if Aberdeen merged with a competitor – and this was triggered by last summer’s £11bn marriage of Standard Life and Aberdeen Asset management, creating Europe’s second-biggest fund manager.

Antonio Lorenzo, chief executive of Scottish Widows and group director of insurance and wealth at Lloyds, said: “Given the merger of Standard Life and Aberdeen has resulted in our assets being managed by a material competitor, it is now appropriate to review our long-term asset management arrangements to ensure they remain up to date and that customers continue to receive good service and investment performance.” Widows acknowledged that Aberdeen had delivered good service and performance, and could take part in the review if it was “able to resolve the competition issue”. Keith Skeoch and Martin Gilbert, joint chief executives of Standard Life Aberdeen, said: “We are disappointed by this decision in the context of the strong performance and good service we have delivered for LBG (Lloyds Banking Group), Scottish Widows and their customers. We will be discussing the implications of this with LBG and Scottish Widows.”

The investment management deal will end after a 12-month notice period, as required under the original agreement between AAM and Lloyds.

The scramble to take charge of the assets is set to begin immediately, with candidates likely to include sector big guns such as Blackrock, Fidelity and Schroders. Lloyds, Widows and Standard Life Aberdeen have been locked in in-depth but fruitless talks to try and resolve the competition issues since the merger.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Losing this book of business would strike a sour note for the Standard Life Aberdeen merger.”