The Market Opportunity

2.5x bigger than the U.S. banking system, the European banking systems highly fragmented, inefficient, and capital intensive. With circa 6,000 banks operating in the market, the sector is characterised by a deep local nature, highly reliant on domestic markets and with no relevant pan-regional champions.

The structural inefficiencies as well as the structural and regulatory fragmentation of the European banking landscape unlock large investment opportunities for a ‘Local-Local’ player like Arrow, regardless of economic cycles.

Currently, there are over €1 trillion of non-performing loans (NPLs) and non-core assets in Europe. Many of these sit on bank balance sheets and more are created every day. For banks to maintain adequate capital ratios, these assets have to shift into the capital markets.

In addition to that, there is a significant amount of NPLs that have been sold to investors and funds yet to be resolved, representing a significant secondary market, as well as a large volume of non-core assets (product lines, joint-ventures, foreign operations) that banks want to discontinue or divest.

Economic dislocation related to the COVID-19 pandemic means that Arrow’s target NPLs and non-core assets are expected to increase significantly over the next years:

  • ECB 2020 stress tests suggest that NPLs levels could reach €1.4trn once COVID-19 related reliefs are withdrawn

The Market Opportunity

In addition to the primary market, there is a large, active and growing secondary market in assets that banks – over €700 billion sales in Europe in the last 6 years (of which c. 60% in Arrow’s 5 target markets).

Assuming an average hold period, and 50% already collected, then the secondary market in the next five years will be significant, as investors start to divest of acquired portfolios.

Country Totals











Assuming 6yr average hold
period and 50% already collected

Estimated Secondary Sale Market in Arrow Geographies

High Value Niches Drive Returns


European Banking Landscape

The value of European banking assets is more than 2.5 the US, but these assets are deeply fragmented and take a long time to resolve. For a vertically-integrated asset servicer and asset investor like Arrow, this means a universe of over €1 trillion of assets we can trawl to cherry pick opportunities regardless of economic cycles.