Prospect of Lloyds deal with Fortis welcomed

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The Independent Online

Lloyds TSB and Fortis shares were chased higher yesterday as investors applauded plans for a potential merger of the banks' asset management businesses.

Lloyds, the owner of Edinburgh-based Scottish Widows Investment Partnership, improved 7p to 470.25p, while Belgian-Dutch Fortis climbed nearly 2 per cent to €24.71.

As revealed in The Independent yesterday, the pair are looking into setting up a joint venture to manage combined funds of more than £155bn. That would create a "European asset management powerhouse" which would have far greater buying and selling clout and would boost profitability by cutting costs.

Richard Barnes, a banking analyst at Standard & Poor's, said: "It would help Lloyds in the breadth of their fund offering. At the moment, they are very UK focused. By going into partnership with a continental European firm, it would help them broaden their product reach."

Experts believe that consolidation among fund managers is likely to continue apace, as companies chase economies of scale.

Sector analysts said that a tie-up is unlikely to diminish the British bank's ability to sell financial products over here, but could offer an opportunity to outsource asset management.

Lloyds snapped up the Scottish Widows life and pensions group at the top of the market in 2000 for almost £7bn. Its asset management arm is among the top 10 UK managers.

Lloyds itself is seen as vulnerable to a potential predator. Recent speculation has centred on the possibility of a bid from Bank of America or Wells Fargo.

Aware of this vulnerability, the British bank has already explored potential tie-ups with Deutsche Bank, Dutch financial services giant ABN Amro and Banco Bilbao Vizcaya Argentaria of Spain.