Lloyds in £660m sale of Widows division

Lloyds held a six-month auction for SWIP as part of its decision to focus on its UK retail and commercial banking businesses.

The bank, which is 32 per cent owned by the taxpayer after it was bailed out by the Government following the takeover of Halifax and Bank of Scotland at the height of the banking crisis, will continue to own Scottish Widows, the group’s life, pensions and investment business.

Lloyds needs to plug an £8.6bn shortfall identified by the financial regulator to persuade the regulator to let Lloyds start paying dividends again next year.

The deal will lift Lloyds’ Core Tier 1 capital by 11 basis points from the 9.9 per cent reached in the third quarter to the 10 per cent target set by the financial watchdog.

The deal will turn Aberdeen into Europe’s biggest, listed stand-alone fund manager.

Aberdeen will pay with shares worth about £560m, which are worth 9.9 per cent of the company.

It will also pay £100m in cash over five years depending on how well the assets perform.

The two companies plan to form a long-term strategic partnership and a broad range of Aberdeen’s investment funds will now be sold through 1,300 Lloyds branches.

Aberdeen’s assets under management will rise to £336bn from £200bn following the deal.

Lloyds has agreed a one-year lock-up on the shareholding.

Aberdeen fought off competition from other potential bidders, including Australian investment bank Macquarie, to secure a deal that will see it overtake Schroders as Europe’s biggest investment house.

Aberdeen’s chief executive Martin Gilbert said: “We are confident that this transaction will deliver considerable additional value to our expanded client base and this will therefore benefit our shareholders. I am delighted to welcome Lloyds as a major shareholder.”

Aberdeen has seen a sharp rise in its assets since the financial crisis under Mr Gilbert’s leadership. It has benefited from strong demand for its global emerging market equities funds and a flurry of acquisitions.

Adding Scottish Widow’s strength in fixed-income will provide diversification to its equities business.

Aberdeen also reported that full-year earnings were slightly ahead of market forecasts.

Net revenue jumped 24 per cent in the year to September 30 to £1.08bn.

Underlying pre-tax profits were 39 per cent higher and Aberdeen said it would pay a full year dividend of 16p per share, up from 11.5p last year.

The sale is the latest step in the transformation of Lloyds under chief executive Antonio Horta-Osorio.

He will qualify for a long-term bonus worth £2.3m this week if shares in the banking group hold steady.

He stands to receive just over three million shares should the stock close above 73.6p on Wednesday.

Mr Horta-Osorio will not be able to sell the shares until 2018 under the incentive scheme.

They closed at xp yesterday, a rise of xp to xp.

Last month a near doubling of profits at Lloyds was overshadowed by another hefty bill to compensate customers mis-sold loan insurance.

Lloyds has set aside another £750m in compensation, which means it has now set aside more than £8bn to deal with the most expensive consumer finance scandal in UK history.

Lloyds has had to pay out far more than any other bank.

The group reported an underlying profit, not including the payment protection insurance (PPI) charge, of £1.5bn, up 83 per cent on last year, reflecting an improved interest margin and lower costs.

Lloyds has already spent £6.3m on the compensation programme. Of the £8bn total now set aside, £1.7bn is earmarked for administration costs.

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