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.
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