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Britain's biggest fund manager Standard Life Aberdeen won a £100 billion funds row with Lloyds Bank on Tuesday, paving the way for a multi-million pound payout.
The FTSE 100 fund manager, which manages £550 billion, won a crucial legal case against Lloyds over the bank’s decision to terminate a fund management contract, depriving Standard of around £330 million in fees over three years.
Lloyds ditched the deal last February saying the newly-merged Standard Life Aberdeen (SLA) was a “material competitor” to its Scottish Widows division, led by Antonio Lorenzo.
SLA said Lloyds had no right to terminate and a three-person arbitration panel agreed , scuppering Lloyds’ plans to withdraw.
In a worst case scenario for Lloyds, SLA could hang on to the money until 2022 when the contract expires.
More likely is that SLA will receive compensation from Lloyds so the bank can end the deal early. Analysts predict that this could be between £300 million and £330 million.
The two sides will now enter talks to thrash out a compromise.
Keith Skeoch, SLA chief executive, said: “Now that the arbitration panel has ruled in our favour, we will carefully consider our next steps, working constructively with Lloyds to bring the matter to resolution,” he said.
The stakes are high for both sides, with the funds worth around £110 million of fees per year to Standard Life Aberdeen — £330 million over three years — according to analysts.
Lloyds has already agreed to hand the bulk of the £100 billion to SLA’s rival Schroders.
Around £13 billion has been earmarked for a joint wealth management venture between Lloyds and Schroders. The tie-up is still expected to launch in June, analysts said.
Lloyds’ Scottish Widows unit said it was disappointed, saying it would start talks to begin the “orderly transfer” of funds to BlackRock and Schroders.
Skeoch, who took sole charge of the firm last week, struck a conciliatory tone, suggesting he wants to maintain a relationship with the bank.
Hargreaves Lansdown’s Laith Khalaf said the two sides may work together again. “We think there could even be a bit of mix and match, where Lloyds pays to release some assets to get its joint venture with Schroders up and running, while leaving some funds with Standard Life Aberdeen,” he said.
Shares in SLA rose 2% to 270.2p.