UPDATE 1-Lloyds sells Standard Life Aberdeen stake

(Adds Lloyds comment, background)

LONDON, June 7 (Reuters) - Lloyds Banking Group will sell its remaining 97.7 million shares in Standard Life Aberdeen, representing a 3.3 percent stake in the asset manager, Bank of America Merrill Lynch which is running the deal said on Thursday.

The sale comes after Lloyds cancelled its 109 billion pound ($146 billion) mandate with Standard Life Aberdeen (SLA) in February, citing competition concerns following the 11 billion pound merger of Aberdeen Asset Management and Standard Life.

"The holding supported the partnership agreements that were previously in place with Standard Life Aberdeen, but given notice has been served for these agreements, and we are not a natural long-term holder of equities, we have now made the decision to sell the stake," a Lloyds Banking Group spokesman said by email.

Plans for an insurance partnership between Lloyds and SLA also fell through earlier this year, market and industry sources told Reuters. SLA has since sold its insurance business to Phoenix.

SLA is disputing the cancellation of the mandate, saying last month it did not agree it posed a competition threat.

($1 = 0.7447 pounds) (Reporting by Lawrence White and Carolyn Cohn Editing by Alexandra Hudson and Susan Fenton)