Standard Life Aberdeen could scoop £300m in wake of Scottish Widows ruling

The dispute dated back to last February when Lloyds declared that a major account managed for subsidiary Scottish Widows by Aberdeen Asset Management should be pulled.

Aberdeen Asset Management bought an eight-year contract to manage assets for Scottish Widows in 2014 for £550 million.

However, after Aberdeen merged with Standard Life to create Standard Life Aberdeen last year, Widows’ parent Lloyds pushed Standard Life Aberdeen off the funds as it then viewed the arrangement as a conflict of interest for SLA because Aberdeen had, in effect, become its competitor.

Global investment manager Schroders then emerged as the suitor set to take control of the contested £109 billion Scottish Widows investment mandate.

However, yesterday a tribunal ruled that Lloyds did not have the right to cancel the £109bn investment management deal with SLA.

Moreover, the ruling does not give Lloyds the right to appeal.

The decision leaves SLA with the option of seeking compensation from Lloyds or continue managing the assets until March 2022, when the original mandate was due to expire.

And analysts have now weighed in to speculate that SLA could well be eyeing compensation, with the £300m being bandied about on the basis of the annual management revenue from managing the assets for the next three years.

SLA reported fee-based revenue of £1.9bn for 2018 last week.

One analyst, Edward Firth of KBW, was quoted by Reuters as saying: “We could expect Lloyds to have to pay compensation. This is likely to be in the order of around £300m.”

Bank of America Merrill Lynch described the ruling as an “unexpected positive outcome” for SLA and also believes a compensation claim could be on the cards.

It said: “SLA stated it is now ‘carefully considering the terms of the decision and appropriate next steps’. In the meantime, SLA will continue to manage the assets.

“We believe the asset transfer away from SLA could still take place, but SLA would likely be compensated in our view.”

Speaking in the immediate aftermath of the ruling, Keith Skeoch, chief executive of SLA, said: “Now that the arbitration panel has ruled in our favour, we will carefully consider our next steps, working constructively with LBG to bring the matter to resolution.”