Britain’s biggest high street lender is to inject its £13bn wealth management arm into a new joint venture with Schroders, the blue-blooded investment giant whose clients are said to include the Queen.
Sky News has learnt that Lloyds Banking Group is finalising the details of the partnership ahead of an announcement by the two companies later this month.
The deal will see Lloyds owning 50.1% of the new JV, with Schroders owning the rest, according to a source close to the deal.
It will help reshape the City’s vast wealth management sector by taking Schroders, an institution which traces its roots back to 1804, into the so-called ‘mass affluent’ customer demographic for the first time.
Sources said the transaction would harness Schroders’ technology and investment management capabilities and marry them with Lloyds’ vast distribution network, fulfilling the strategic objectives of both partners.
Taking the UK’s biggest high street bank, which owns the Halifax network, deeper into wealth management services for millions of customers is a priority for Antonio Horta-Osorio, Lloyds’ chief executive.
It will be part of a three-pronged tie-up between the companies, with Schroders taking on a £109bn investment management contract from Lloyds-owned Scoottish Widows.
That mandate is currently held by Standard Life Aberdeen (SLA), but has been terminated by Lloyds in fractious circumstances after it argued that last year’s £11bn merger of Aberdeen Asset Management with Standard Life had put the enlarged group in competition with it.
The dispute between Lloyds and SLA is now the subject of an independent arbitration process.
The third leg of the Lloyds-Schroders tie-up involves Cazenove Capital, the wealth manager for high net worth individuals.
Sources said that Lloyds would acquire a 19.9% stake in the division as part of the overall agreement, although Cazenove Capital would not be directly involved in the new wealth JV.
Both the Lloyds and Schroders boards are said to have agreed to sign off on the deal, although it has not yet been formally agreed.
It is said to have a total value of about £500m, with the Lloyds wealth unit and the 19.9% stake in Cazenove Capital valued at roughly £250m each, according to one source.
The Financial Times reported last week that Schroders was close to beating its final remaining competitor, BlackRock, to the £109bn investment management mandate, which is one of Europe’s largest.
SLA is demanding a break fee of about £250m for ending its contract early, the FT added.
Goldman Sachs Asset Management and JPMorgan Asset Management were also in contention for the contract at an earlier stage of the process.
Lloyds, which is being advised by the investment bank Evercore Partners, and Schroders both declined to comment on Sunday.