Lloyds in talks that may create fund giant

Analysts said any deal was likely to be worth up to £500m and could deliver cost savings and a stronger position in fixed-income products for Aberdeen, while helping Lloyds meet regulatory demands to raise more capital.

Under the terms being discussed, part state-owned Lloyds would end up owning a stake in Aberdeen as payment, along with deferred cash payments conditional on the business’s future performance, Aberdeen said yesterday.

News of the talks came as a surprise to analysts, because Aberdeen’s focus had been on growing its existing business, and not all were convinced.

“We have a mixed reaction,” said RBC Capital Markets analyst Peter Lenardos.

“Aberdeen is once again an acquisition-driven growth story and not a dividend yield/capital return story.”

Aberdeen chief executive Martin Gilbert said as recently as April that a bid for Scottish Widows was “extremely unlikely”.

Lloyds hired Deutsche Bank in April to advise on the sale of the business, and would end up with around a 10 per cent stake in Aberdeen if Scottish Widows sold for £500m.

Industry sources said Aberdeen was not the only party interested in Scottish Widows and the bank expects to make a decision on a preferred bidder by the end of the year.

Lloyds declined to comment.