The market opportunity

Twice as big as the U.S. banking system, the European banking system is highly fragmented, inefficient, and capital intensive.

With over 5,500 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 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 impact of the high levels of inflation and interest rates rise on default risk, together with the existing risks that remain from the Covid-19 pandemic means that Arrow’s target NPLs and non-core assets are expected to increase significantly over the next years.

Our point of view

Arrow’s unique integrated model drives track record of generating consistently high teens returns.

Country Totals











The secondaries markets

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.

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 c. two times more than the US, but these assets are deeply fragmented and take a long time to resolve. For a vertically integrated alternative asset manager like Arrow, this means a universe of over €1 trillion of assets we can trawl to cherry pick opportunities regardless of economic cycles.

Our point of view

This pool of distressed assets is sustained because of the inefficiency of more than 5,500 banks in Europe and compounded by systemic shocks like the GFS and the pandemic.