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Schroders quiet on Lloyds tie-up as intermediary assets slip

By Jessica Tasman-Jones, 15 Oct 18

Slice of the £109bn mandate would boost sluggish AUM growth

Schroders has revealed intermediary assets have slipped in the year to date as an announcement on whether the firm has landed the remaining slice of a £109bn ($143bn, €124bn) mandate from Lloyds Banking Group remains imminent.

Intermediary assets fell to £132.1bn for the period ended 30 September 2018 compared to the £134bn held at the start of the year.

Overall, AUM growth in the group’s asset management division did not even reach 1%, instead creeping up from £389.8 to £392.3bn in Q3. That represents 0.6% growth slightly better than the zero net inflows seen in the year’s first half.

Boost flat AUM growth

The £79bn slice of the Lloyds mandate would be a welcome boost the asset manager’s sluggish AUM growth. Blackrock last week bagged £30bn of the £109bn mandate, which Lloyds announced in February it was yanking from Standard Life Aberdeen.

In a regulatory filing earlier in October, Schroders confirmed it was involved in talks with Lloyds “with a view to working closely together in parts of the wealth sector”, in reference to speculation that Schroders would give up a partial stake in Cazenove Capital as part of a deal involving the bank’s giant mandate.

Cazenove represents the UK and Channel Islands business within Schroders’ wealth management division. Overall, wealth management AUM has grown 2% from £45.9bn to £46.8bn in Q3.

Strategic benefits from Cazenove tie-up with Lloyds

Last week, Berenberg upgraded Schroders to a ‘buy’ stating both the Lloyds mandate and the wealth management tie-up brought strategic benefits to the asset manager.

It estimated the scale benefits from winning the Lloyds mandate would reduce Schroders’ expense ratio by 5 basis points to 26bps on AUM, although this was before the Blackrock announcement and based on the assumption Schroders would win the entire £109bn mandate.

The analyst note added that a Cazenove deal would marry Lloyds’ infrastructure and client relationships with Schroders’ wealth management and investment expertise. Schroders could replicate the arrangement with banks in other geographies, the note said.

For more insight on UK wealth management please click on www.portfolio-adviser.com

Tags: Lloyds | Schroders

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International Adviser covers the global intermediary market that uses cross-border insurance, investments, banking and pension products on behalf of their high-net-worth clients. No news, articles or content may be reproduced in part or in full without express permission of International Adviser.