BBVA : convenes a shareholders’ meeting to increase capital, thus moving forward with Banco Sabadell’s offer

"With this capital increase we take a step in the purchase process with Banco Sabadell's shareholders. The combination of both entities will generate value for all and, in particular, for the shareholders, by creating a stronger and more competitive bank," BBVA Chair Carlos Torres Vila said.

As indicated in the agenda published on Friday, BBVA will present for shareholder approval an increase in the bank's share capital through the issuance and circulation of up to a maximum of 1,126,339,845 new ordinary shares with a nominal value of €0.49 each, and the same class, rights and obligations as the BBVA shares currently in circulation. The final amount of the capital increase will depend on the number of Banco Sabadell shareholders that take up the offer. BBVA shareholders are not required to make any disbursements.

This capital increase is one of the steps needed for the offer to Banco Sabadell shareholders for 100 percent of the bank's shares, announced on May 9th. The operation aims to combine both banks to build a stronger, more profitable bank that is able to compete in an increasingly global sector with rising needs for investment in data and technology. BBVA has therefore proposed to Banco Sabadell shareholders the exchange of a new BBVA share for 4.83 Sabadell shares. After the exchange, and assuming 100 percent acceptance by Banco Sabadell shareholders, they will have a 16 percent stake in BBVA.

The operation represents clear value creation for BBVA shareholders, with a positive impact on earnings per share (EPS) from the first year after the merger of both banks, and an improvement of around 3.5 percent once the savings associated with the merger are realized (an estimated period of three years following the merger). Additionally, the tangible book value per share increases about 1 percent on the date of the merger. The operation offers a high return on invested capital of around 20 percent², with a limited impact on the CET1 capital ratio of approximately -30 basis points³ provided that 100 percent of Banco Sabadell shareholders take up the offer. Furthermore, BBVA will maintain its current shareholder distribution policy, which represents paying between 40 to 50 percent of profit, with the possibility of combining cash dividends and share buybacks. BBVA will also remain committed to distributing any excess capital over 12 percent⁴.

In addition to a 16 percent stake in the resulting bank, Banco Sabadell shareholders will benefit from a 30 percent premium over the closing price of both banks on April 29; 42 percent over the weighted average prices of last month; 50 percent over the weighted average prices of the past three months.

The operation will also benefit all other stakeholders as it will create value and expand the positive impact of BBVA's banking activity. Customers will have a unique value proposition at their disposal due to the complementarity of the franchises, a greater product offering and the global scope of the bank. Employees will be able to take advantage of new professional opportunities to grow in a global bank. The creation of a stronger and more profitable bank will also translate into more financing for businesses and families, with an additional loan capacity of €5 billion per year in Spain, and higher contributions through taxes. All of this will result in greater economic and social progress. The bank will be stronger and more efficient, and an example in the market due to the volume of assets, loans and deposits.

This operation is subject to Banco Sabadell shareholders taking up the offer, representing a majority of the bank's share capital; obtaining necessary regulatory approvals, as well as the approval of the capital increase needed for the share exchange that is proposed to the BBVA extraordinary shareholders' meeting.

Furthermore, once BBVA has acquired a stake of 50.01 percent or higher of Banco Sabadell's share capital, it will control both banks and a merger is planned. This merger will be subject to the pertinent regulatory approvals.

1. BBVA has convened this extraordinary shareholders' meeting on July 4, on first call, and on July 5th, on second call.

2. EPS and ROIC: calculations based on consensus figures as of April 29, 2024. 'Return on Invested Capital' calculated for 2026 considering estimated savings from the merger, and not taking into account any potential impact from the asset management and custody joint ventures. Formula used: [Incremental return for BBVA shareholders / merger impact on CET1].

3. Potential impact of the joint ventures on asset management and custody services are not included. Penalties for ownership changes and fair value adjustment for insurance joint ventures and payments are already taken into account within the purchase price allocation (PPA).

4. Pro-forma Basel IV, subject to regulatory approvals.