Lloyds Banking Group PLC (LON:RBS) is in talks to merge its £13bn wealth management business into a new joint venture with asset manager Schroders PLC (LON:SDR).
“Discussions are ongoing and there can be no certainty that these discussions will lead to any formal arrangement being entered into,” Schroders said in a statement on Monday.
Schroders issued a statement following a Sky News report on Sunday that the companies are talking about the joint venture as part of a three-pronged deal. Lloyds, the largest U.K. high street lender, would own 50.1% of the venture, a source told Sky News.
Lloyds and Schroders are in the final stages of talks and an announcement is expected later this month, according to Sky News.
As part of deal, Schroders is lined up to take on a £109bn investment management contract from Scottish Widows, which is owned by Lloyds. Also, Lloyds would acquire a 19.9% stake in Cazenove Capital, a wealth manager.
Lloyds returned to private hands last May when the UK government sold the last of its shares after taking a 43% stake in the company as part of a rescue deal during the global financial crisis.
READ: Lloyds and RBS back on their feet 10 years after government's bank rescue deal
In mid-morning trading, shares in both Lloyds and Schroders were little changed at 58.3p and 3,019p respectively.
UBS maintained a 'buy' rating and target price of 3,600p on Schroders, saying: "We calculate Schroders earnings would increase 5-7% if it wins the entire £100bn+ mandate from Lloyds assuming a revenue margin of 12bp and an EBITDA margin on the new business of 40-55%.
"In addition, it would give Schroders an important scale advantage when attempting to win further mandates from insurers, given the scale driven nature of the business. We do not forecast this accretion potential into our earnings (and neither does consensus)."