March 5, 2020 / 8:01 AM / a month ago

UPDATE 2-Britain's Schroders marks $645 bln asset record as profit dips

* Total assets pass 500 bln stg for the first time

* Boosted by inflows from Scottish Widows mandate, Lloyds JV

* Shares up 0.7% in weaker FTSE 100 (Recasts, adds detail from statement, background, share reaction, analyst reaction)

By Simon Jessop

LONDON, March 5 (Reuters) - British money manager Schroders said total assets passed 500 billion pounds ($645 billion) for the first time on the back of inflows of client cash from a large mandate win and a wealth management tie-up with Lloyds Banking Group.

Schroders said its strategy of expanding wealth management, private assets and providing a broader range of asset management ‘solutions’ to clients was doing well, helping outweigh a dip in full-year profit on higher costs and a lower revenue margin.

“We are pleased that the structural changes we have made in our business have delivered a resilient performance with record net new business of 43.4 billion during the year,” Chief Executive Peter Harrison said in a statement.

At 0836 GMT, shares in Schroders were up 0.7%, among the top gainers in a 0.6% weaker FTSE 100.

“The move is toward higher margin wealth management where the company is closer to the client and builds longer lasting relationships,” said finnCap analyst Nik Lysiuk in a note.

A mandate win from Scottish Widows brought in 32 billion pounds while its new Schroders Personal Wealth venture with Lloyd’s added a further 12.6 billion pounds. Stripping these out, it would have seen outflows of 1.2 billion pounds.

Schroders said institutional investors had withdrawn 7.1 billion pounds during the year while mutual funds had seen outflows of 1.5 billion pounds as market uncertainty hit sentiment, and particularly demand for higher-margin equities.

While flows had picked up into year-end, the start of 2020 has been marked by fresh investor concerns, this time about the potential hit to global economic growth of the coronavirus, which has taken trillions of pounds off the value of global stock markets.

Harrison warned the issue would likely dominate the markets in the short-term, with the scale of the damage dependent on the world’s response, although he thought the company’s business resilience was sufficient to deal with the impact.

“You’d expect equities to be able to see across the valley, perhaps better than debt; if you’ve got covenants that’s more of a challenge when you have a business interruption. So, I’m expecting to see more evidence in bond markets than equities.”

“I think we’re creating vast amounts of uncertainty in which are the winners, which are losers, what’s the underlying rate of growth; that’s very positive for an active manager... this is a time when analysis is really going to pay.”

Schroders posted a 4% fall in full-year pretax profit to 624.6 million pounds, down from 649.9 million pounds a year earlier, after staff and other costs rose and revenue margins dipped. ($1 = 0.7755 pounds) (Reporting by Simon Jessop Editing by Rachel Armstrong and Alexander Smith)

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