Arrow Global purchased loan portfolios and loan notes with a face value of £2.2bn, for a purchase price of £258.4m, during 2016.
Annual results for the European debt purchaser show that its purchased loan portfolio asset base increased by nearly 40 percent for the full year of 2016. The financials reveal this figure reached £804.1m in 2016, rising from £586.3m in 2015.
The figure for 2015 excludes £23.5m of portfolios which are due to be resold. Of the £258m deployed last year, £223m related to the purchase of organic portfolios and £35.4m was used for the acquisition of the back book of InVesting, the Belgium and Netherlands-based credit management business.
More than half (52 percent) of the £258m purchases last year related to secured portfolios.
Around £109.8m of these overall purchases were acquired in Portugal; the rest were nearly evenly split between the UK and the benelux union consisting of Belgium, the Netherlands and Luxembourg. Some 70 percent of acquisitions completed by Arrow last year across the group were off-market transactions.
Of the total loan portfolios purchased in 2016, over half (51.7 percent) were invested in secured financial services, and another 48.5 percent in unsecured financial services.
The remaining percentage was split between investments in telecoms (1.5 percent) and retail (one percent).
On asset classes, Arrow said the secured retail debt sale market has grown significantly in recent years, driven by asset sales by a number of large financial institutions. As well as this, around £32bn of unsecured consumer non-performing loans are still estimated to be held by financial institutions.
For the full year of 2016, Arrow acquired £72.6m of purchased loan portfolios in the UK.
The debt purchaser said there is an addressable market opportunity of around £85bn of non-performing loans in the UK. Arrow said the UK regulatory environment has continued to tighten and a number of banks have sought to rationalise their panels, both for debt purchase and debt placement.
Arrow said it has begun to see portfolios coming to market earlier in the cycle and it expects this trend to continue as financial institutions continue to adopt changes arising from new accountancy standards, such as IFRS 9.
In terms of overall group performance, Arrow’s pre-tax profit dropped from £39.2m for the full year in 2015 to £31.3m in 2016.
However, the debt purchaser’s core collections increased by around 30 percent to £286m in 2016, from £218.5 the year before.
Lee Rochford, group chief executive of Arrow Global, said: “During the year, we completed record organic purchases of £223m with the majority sourced in off-market deals.”
In an interview with Credit Strategy, Rochford said Arrow’s acquisition of Italian financial services business, Zenith Service SpA, demonstrated that the business saw “long-term potential” in the country, although the deal is yet to complete regulatory formalities.”
He added: “We are in the process of bringing teams together and they’re excited by what we can bring to their business. The company has strong relationships with local financial institutions.”