Questions and answers about the offer to Banco Sabadell shareholders

• The aim is ultimately to merge the two banks, to build a more solid, more competitive and profitable entity and erect a benchmark within the market in terms of assets, loans and deposits. The new bank will have greater scale, which will put us in a better position to address the structural challenges posed by the financial sector, while efficiently making the necessary investments in digital transformation within an increasingly global sector.
• The complementarity and the ability to generate significant synergies make this transaction financially attractive for the shareholders of both BBVA and Banco Sabadell.BBVA remains firmly committed to all the markets in which it operates, and from a position of strength it will step up its support for businesses and for cultural, scientific and social projects. It will do this not only through its core banking activity, but also through its various foundations in Catalonia, the Valencian Community and the other regions where Banco Sabadell is present.

• The transaction will also be positive for our other stakeholders.

○  Our customers stand to benefit from a unique value proposition, thanks to the synergies between both franchises, a wider range of products and the new bank’s more global outreach.

○ Employees will have access to new career and growth opportunities within an even more global entity

○ The combined bank will be able to lend more to households and businesses (roughly €5 billion in additional lending per year) and to contribute to the public coffers via taxes.

○  This will ultimately lead to greater economic and social progress.

• In mid-April, BBVA’s Chair met with the Chair of Banco Sabadell to convey BBVA’s interest in resuming the talks that did not ultimately come to fruition back in 2020. They were asked to deliver a specific proposal on April 30, but a leak to the press on that day precipitated the events that unfolded. Upon learning that Banco Sabadell’s board had turned down the proposed merger offer on May 6th, BBVA wished to give Sabadell's almost 200,000 shareholders the opportunity to decide for themselves on whether to exchange their shares for those of BBVA. BBVA believes that both sides stand to benefit, and therefore the proposal should be presented directly to Sabadell’s shareholders, its legitimate owners, so that they can weigh it up, without this generating any conflict.
• In accordance with European and Spanish regulations on takeover bids, the decision on whether to accept does not fall to the board of directors of the target company, but rests on the shoulders of its shareholders. The board must comply with the neutrality rule, which prohibits any action not approved by the shareholders that might impede the success of the bid.

• The offer represents a premium of 30 percent over the closing price on April 29¹ of 42 percent² over the volume weighted average price of the month prior to April 29; and of 50 percent² over the weighted average price for the previous three months.
• Assuming 100 percent uptake, Banco Sabadell shareholders would acquire a stake of approximately 16 percent in BBVA, benefiting from the additional value created at the combined entity.
• Given the synergies expected to result from the combination of both entities (€850 million), earnings per share would increase by about 27 percent³ for the shareholders of Banco Sabadell.

¹According to the terms set out in the communication to the market released on May 1, 2024.

²According to the terms set out in the communication to the market released on May 1, 2024 and based on the volume average weighted price (VWAP) of Banco Sabadell and BBVA at the corresponding date.

³ Increase in earnings per share (EPS) for Sabadell shareholders, calculated as the variation between the following two figures:

- Initial estimated EPS in 2026: estimated EPS for Banco Sabadell of €0.24/share. This EPS is calculated as the quotient of: estimated net profit in 2026 for Banco Sabadell of €1.25 billion according to analyst consensus published in Bloomberg on April 29, 2024; and the number of Banco Sabadell shareholders after deducting the total amount of shares in the €340 million share buyback plan that the bank had in place on that date (estimated at 5.28 billion shares).

- Estimated final EPS in 2026: estimated EPS in 2026 (adjusted for the initial exchange ratio of one share of BBVA for every 4.83 shares of Banco Sabadell) for the resulting bank (BBVA+Sabadell) of €0.30/share. This EPS takes into consideration: in the numerator, 1) the sum of the estimated net earnings in 2026 of BBVA and Banco Sabadell according to analyst consensus published in Bloomberg on April 29, 2024 (€8.09 billion and €1.25 billion respectively); plus 2) the net synergies (assuming complete implementation) from taxes (€603 million); in the denominator, the number of shares of the resulting bank (6.86 billion shares), assuming 100 percent uptake (based on the above-mentioned 5.28 billion Banco Sabadell shares), adjusted for the indicated exchange ratio.

• The adjustment was made to reflect the dividends paid by both banks and was already envisaged in the terms of the offer made public on May 9, 2024. The aim is to ensure that the economic terms of the offer remain the same if the banks distribute dividends, as has been the case.
• Thus, Banco Sabadell shareholders who accept the offer will receive one new share in BBVA and €0.29 in cash for every 5.0196 shares in Banco Sabadell that they hand over in exchange⁴. In other words:
  • The exchange ratio is now one newly issued share in BBVA for every 5.0196 shares in Banco Sabadell⁵ to reflect the impact of the dividend paid by Banco Sabadell (€0.08 gross per share) on October 1, 2024.
  • Additionally, a cash payment of €0.29 is added for every 5.0196 common shares of Banco Sabadell, as a result of the dividend paid by BBVA on October 10, 2024.

⁴ Consideration adjusted to reflect the dividend of €0.08 gross per share paid out by Banco Sabadell on October 1, 2024, as well as the dividend paid out by BBVA on October 10, 2024 (€0.29 gross per share).

⁵ Previously: 1 newly issued share in BBVA for every 4.83 shares in Banco Sabadell.

• The financial terms are attractive for shareholders of both banks, given the potential for unlocking significant synergies.

Specifically, for BBVA shareholders⁷:

• The increase in earnings per share⁸ will be gradual from the first year of the merger, increasing by 3.5 percent once the savings have been fully realized (in the third year following the merger).
• Tangible book value per share will increase by approximately one percent on the merger date.
• The incremental return on investment for BBVA shareholders (ROIIC) is approximately 20 percent⁹, which is significantly higher than the cost of capital and compares favorably with other investment options, particularly with a potential share buyback.

⁷According to the terms set out in the offer presented on May 9, 2024.

⁸ Based on consensus figures from April 29, 2024, taking estimated synergies into account.

⁹ Calculated for 2026 taking estimated synergies from the merger into account, and not including any potential impact resulting from the asset management and custody joint ventures. Formula used: [Incremental result for BBVA shareholders / impact of merger on CET1]. Based on consensus figures as of April 29.

• From the moment that an acquisition is announced, it is common for the share price of the target bank to converge with the exchange price being offered, especially when the transaction will take place through an exchange of shares
• This convergence does not mean that the offer is less attractive, but that to a large extent the share price already reflects the value of the offer. In other words, in the absence of this offer, the share price would be different.
• It therefore makes sense to assess the attractiveness of the transaction by comparing the premium with the share price prior to the announcement of the transaction (in this case, April 29).
• In this sense, BBVA’s offer implies a premium of 30 percent over the price on April 29¹⁰, 42 percent¹¹ over the weighted average share price for the month prior to April 29; and 50 percent¹¹ over the weighted average share price for the previous three months.

¹⁰ According to the terms included in the notification to the market on May 1, 2024.

¹¹According to the terms included in the communication to the market on May 1, 2024 and based on the volume average weighted price (VWAP) of Banco Sabadell and BBVA at the corresponding date.

• Our approach has always been friendly.
• In mid-April, the BBVA Chair approached the Banco Sabadell Chair to explore a potential merger, based on the terms negotiated in 2020, but with a substantially better financial offer.
• On April 30, BBVA presented the written proposal for a merger to Banco Sabadell’s Board. Banco Sabadell rejected the proposal on May 6.
• On May 8, BBVA’s Board of Directors agreed to present the offer, on the same financial terms presented to Banco Sabadell’s Board, directly to its shareholders in order to give them the opportunity to decide. This decision by BBVA’s Board led to the announcement prior to the public offer published the following day, May 9.

• We expect a limited impact on CET1 of approximately -38 basis points assuming 100 percent¹² uptake.

¹² Updated impact on capital (initial estimate of -30 bps) based on the adjustment in the consideration under the offer to offset the cash dividend paid by BBVA on October 10, 2024, as stipulated in the offer presented on May 9, 2024

• Once BBVA has acquired a stake equal to or greater than 50.01 percent of Banco Sabadell’s share capital, BBVA intends to merge the two banks.
• Restructuring costs associated with the merger would stand at approximately €1.45 billion before taxes, which would be recorded in the income statement for the year of the merger.
• It is important to note that, unlike various market precedents, this transaction will involve lower restructuring costs/savings associated with personnel expenses. This is because both BBVA and Banco Sabadell have already undertaken significant network optimization over the past few years. Most of the synergies are associated with savings in technology and systems costs, as well as other general administration expenses, with a lower associated restructuring cost.

• The estimated value of the synergies associated with the merger of the two banks stands at €850 million before taxes. Key items include:
  • Operating cost savings are estimated to be approximately €750 million before taxes. Of this amount, €450 million corresponds to general expenses (technology and administrative costs) and €300 ³million to personnel costs.As part of the cost optimization and rationalization process, BBVA estimates that less than 10 percent of the branches of the combined bank in Spain¹³ will be closed (the equivalent of 300 of the 870 branches with a proximity of less than 500 meters).The materialization of these synergies is expected to be staggered: 25 percent within the first year post-merger, with the remainder occurring gradually until reaching 100 percent of the estimated savings by the third year after the merger.
  •  Savings in funding costs estimated at €100 million before taxes. These savings will accrue gradually as Banco Sabadell's wholesale funding instruments mature.

¹³ On June 30, 2024, BBVA had a network of 1,881 branches in Spain, while Banco Sabadell had 1,159; in other words, a total of 3,040 branches.

• BBVA has not considered any positive or negative revenue synergies in the figures it has disclosed.
• VA’s intention is to boost the growth of the combined bank: it has calculated a capacity to lend an additional €5 billion per year to households and businesse

• In a scenario in which the offer made to Banco Sabadell shareholders is a success, the transaction will have received the green light from multiple authorities (including the Spanish competition regulator, the CNMC, the ECB, and the Spanish securities markets regulator, the CNMV) and from the shareholders of BBVA and Banco Sabadell who take up the offer.
• fterwards, BBVA intends to merge both banks. BBVA believes that the merger is highly likely
• In any event, even without a merger, the transaction remains attractive, as most of the synergies would be achieved.

• BBVA has made an estimate, based on public information, of the potential cost of breaking up these alliances. 
• BBVA’s calculations include a financial penalty arising from the change of control in relation to Banco Sabadell's existing alliances related to pensions, bancassurance and payments, as well as the corresponding fair value adjustments.
• In any case, once BBVA has all the information needed to make a sufficiently informed decision, it will begin a negotiation process with Banco Sabadell's partners for each of the existing agreements, and make the best decision based on value creation for shareholders and customers.

• BBVA is committed to ensuring that no one is denied access to financial services.
• Of the remedies BBVA has presented the CNMC, several are related to financial inclusion. For a three-year period, BBVA has committed to:
  • Not closing branches where there is no other branch (of BBVA or Banco Sabadell) within a radius of at least 300 meters.
  • Not closing offices in postal codes with a per capita income of less than €10,000.
  • Not leaving behind any municipality (or replacing a branch with an agent, mobile bank or other means) where there are fewer than  three competitors¹⁴. Customers in these municipalities will be offered the Correos Cash service twice a month, at no cost.
  • Maintaining teller services with the same business hours as Banco Sabadell’s offices in these municipalities.
  • Creating an account for vulnerable customers, with no opening, administration or maintenance fees, a free debit card and free, unlimited domestic transfers on digital channels, among other conditions.

¹⁴ For competition purposes, BBVA and Banco Sabadell are considered a single bank.

• BBVA is fully committed and deeply rooted in the regions within its footprint, especially those where Banco Sabadell is most strongly present: Catalonia and the Valencian Community. These are key markets where BBVA is set to step up its support for business, arts and culture, science and the wider community through its own banking activities and through its non-profit foundations.
• The new bank will have two operational headquarters in Spain: one at Banco Sabadell’s corporate center in Sant Cugat del Vallès (Barcelona) and the other at Ciudad BBVA, in Madrid.
• Furthermore, the Sabadell brand will continue to be used alongside the BBVA brand in those regions or businesses in which doing so would make good commercial sense.
• Finally, Barcelona’s role as a European hub for startups will be further enhanced by combining the projects and initiatives of both banks.

• At an extraordinary general meeting held on July 5, with 96 percent of votes in favor, BBVA shareholders overwhelmingly approved the capital increase needed to cover the share exchange offered to Banco Sabadell shareholders.
• This milestone marks a highly significant step needed to move forward in the most attractive project in the European banking sector. 
• The approval of the capital increase by BBVA shareholders was one of the conditions stipulated in the acquisition offer made to Banco Sabadell shareholders (together with a minimum of 50.01 percent of Banco Sabadell shareholders taking up the offer and obtaining regulatory approval¹⁵).

¹⁵ CNMC (approval pending) and the Prudential Regulation Authority (PRA), received on September 3, 2024.

• BBVA has already received two of the key authorizations: the green light from the Prudential Regulation Authority (PRA) and non-opposition from the European Central Bank, on Sept 3 and 5, respectively. Furthermore, on November 26, 2024, the European Commission Directorate-General for Competition completed its review of the transaction according to the EU Foreign Subsidies Regulation without raising any objections.
• The next steps needed include the approval of the Spanish competition authority (CNMC), the authorization of the Spanish securities markets regulator (CNMV) and the uptake of the offer by Banco Sabadell shareholders representing the majority of its share capital (more than 50.01 percent).

• We believe the Spanish financial sector is highly competitive due to strong competition from both major and smaller players, including new entrants and fintech firms.
• The analysis of the combined market share of the two banks suggests that it will remain moderate on a national level in the key segments. Specifically, the resulting national market share would be 22 percent for lending, 20 percent for deposits, and 17 percent for branches. 
• In any event, market shares and concentration levels must be viewed in the context of other equally important factors, such as the high degree of buoyancy and competitiveness, the absence of barriers to entry—which are also being eroded as the digitization of financial services moves forward—and customers’ ability to switch operators at no cost. In terms of digitization, 85 percent of interactions between banks and customers are conducted over digital channels.

• Following a thorough analysis of the integration by business segment and territories by CNMC in the first phase, it shows that it has not identified any problems in most of the markets analyzed, while identifying certain risks that are very limited.
  • The CNMC has determined that only three areas require further analysis in phase 2 of the procedure: (1) commercial terms and conditions for SMEs in certain locations; (2) lending volume for SMEs in certain locations;  and  (3) commercial terms and conditions for acquiring services (point-of-sale,  or POS terminals). The purpose of the second phase is to value the adequacy of BBVA’s remedies in said areas taking into account thethe opinions of market participants.
  • The CNMC’s assessment of the other remedies presented by BBVA in terms of financial inclusion, access to ATMs and conditions for individual customers and large companies is positive. 

• BBVA will continue to collaborate on this second phase of analysis to finalize the remedies agreement and the approval of the transaction. 

• BBVA considers this an operation with the potential to create undeniable value for Sabadell and BBVA shareholders, and for all of our other stakeholders: customers, employees and society as a whole.
• We expect the transaction to be approved within a few months, maintaining its full potential for value creation.
• If this were not the case, in other words, if value creation were compromised, BBVA has the option to withdraw its offer.
• BBVA will continue working closely with the CNMC to finalize the commitments and secure approval of the transaction.

• BBVA has submitted to the Spanish National Markets and Competition Commission (CNMC) a series of unprecedented measures to guarantee financial inclusion, lending to SMEs and competitiveness¹⁶.
• These remedies largely mitigate the risks identified by the CNMC, which are mainly confined to certain territories (Catalonia and the Valencian Community in particular), and their aim is to ensure a prompt authorization of the integration with Banco Sabadell.
• Remedies to guarantee financial inclusion:
  • Not closing branches where there is no other branch (of BBVA or Banco Sabadell) within a radius of at least 300 meters.
  • Not closing offices in postal codes with a per capita income of less than €10,000.
  • Not leaving behind any municipality (or replacing a branch with an agent, mobile bank or other means) where there are fewer than  three competitors. Customers in these municipalities will be offered the Correos Cash service twice a month, at no cost.
  • Maintaining teller services with the same business hours as Banco Sabadell’s offices in these municipalities.
  • Creating an account for vulnerable customers, with no opening, administration or maintenance fees, a free debit card and free, unlimited domestic transfers on digital channels, among other conditions.

• Remedies to maintain the terms and conditions for individuals and SMEs:
  
  • Maintaining the commercial terms and conditions in postal codes with fewer than four financial institutions¹⁸.
  • Furthermore, for SMEs in these postal codes new loan prices will not exceed the average price on a national level.
  • Not closing any Banco Sabadell offices specializing in businesses anywhere in Spain.
• Remedies to ensure lending for SMEs throughout Spain¹⁹:
  • Guaranteeing the continuity of all working capital lines (loans with a termination or renewal period equal or less to one year) that Banco Sabadell had in place in Spain for a period of 18 months.
  • Maintaining all credit volume for SMEs that only have BBVA or Banco Sabadell as a financial provider for a period of 18 months.
• Remedies regarding access to ATMs:
  • Maintaining access to Banco Sabadell’s ATMs for all customers of banks in the Euro 6000 network for a period of 18 months, or until the merger of the banks takes place (in case BBVA ends the existing agreement between Banco Sabadell and the banks in the Euro 6000 network).
• In addition, in line with previous transactions, BBVA has proposed the divestment of excess stakes in payment companies. 
• The bank will continue to collaborate closely with the CNMC to finalize the remedies agreement and the approval of the transaction.

¹⁶ With a duration of three years, except where otherwise noted.

¹⁷ For competition purposes, BBVA and Banco Sabadell are considered a single bank.

¹⁸ For competition purposes, BBVA and Banco Sabadell are considered a single bank.

¹⁹ Except for financial decline.

• Following the approval of the CNMC and once the CNMV gives its authorization,  Banco Sabadell shareholders have an acceptance period of a minimum of 30 calendar days to respond to the exchange offer. BBVA has the option of extending the deadline up to a maximum of 70 calendar days.

• We estimate that the merger will take between six and eight months.
• The merger requires the authorization of the Spanish Ministry of Economy, Commerce and Enterprise.

• Banco Sabadell’s shareholders must decide whether they accept the offer presented by BBVA.
• Once the prospectus has been approved by the CNMV, and within a maximum of five business days, BBVA will publish the offer and its acceptance period will begin.
• Banco Sabadell shareholders who wish to accept the offer must present their declaration of acceptance to the organization where their shares of Banco Sabadell are held, during the period established for this purpose by BBVA.
  • The acceptance period will begin on the first trading day following the publication of the offer.
  • It will be no less than 30 calendar days and no more than 70.²⁰
• Banco Sabadell shareholders may accept the offer for all of the shares they hold, or only for a portion of them.
• Offer acceptance statements may be revoked at any time before the final day of the acceptance period.
• Following the acceptance period, and a maximum of seven trading days after this date, the governing bodies of the Spanish Stock Exchanges will publish the results of the offer in the Official Listing Bulletins in the terms and during the session specifically indicated by the CNMV.

²⁰ BBVA may extend the offer acceptance period once, or multiple times, after notifying the CNMV, as long as it does not exceed the maximum period of 70 calendar days.

• The bid extends to all Banco Sabadell shareholders. 

• BBVA intends to press ahead with the merger between BBVA and Banco Sabadell as swiftly as possible following the settlement of the offer. The exchange ratio will be equivalent, insofar as possible, to the consideration proposed in the offer.
• Banco Sabadell shareholders who choose not to take up the offer during the acceptance period will retain their shares in Banco Sabadell until both banks are ultimately merged. 
• As a result of the offer, the number of shares outstanding of Banco Sabadell in the hands of shareholders other than BBVA may fall significantly. Therefore, during the period (between the completion of the offer and the merger) in which Banco Sabadell remains a listed company, this situation may affect the liquidity of its shares.
• If at least 90 percent of Banco Sabadell’s share capital accepts the offer, BBVA will exercise its squeeze-out right on the remaining shares of Banco Sabadell's share capital that did not take up the offer, under the same terms as the offer, but adjusted to reflect the new exchange ratio (one new BBVA share plus €0.29 in cash for every 5.0196 existing Banco Sabadell shares). If this were to occur, BBVA would become the holder of all (100 percent) of Banco Sabadell's capital stock and Banco Sabadell would automatically be deli

• BBVA is proposing the combination of two great banks, so that they can achieve more together than they could hope to achieve by going it alone.  In addition to the attractive premium from the transaction, Banco Sabadell shareholders will benefit from the increased capacity to generate earnings and the significant potential for synergies (€850 million gross annually once the combination takes place). Therefore, Banco Sabadell shareholders stand to benefit from an increase in earnings per share of approximately 27 percent²¹.
• This higher earnings per share would also translate into sustainable dividends over time, as BBVA will maintain its attractive shareholder distribution policy, which involves payouts of 40 to 50 percent of profit, with the possibility of combining cash dividends and share buybacks, as well as the commitment to distribute excess capital over 12 percent²².

²¹ Increase in earnings per share (EPS) for Sabadell shareholders, calculated as the variation between the following two figures: - Initial estimated EPS in 2026: estimated EPS for Banco Sabadell of €0.24/share. This EPS is calculated as the quotient between: estimated net profit in 2026 for Banco Sabadell of €1.25 billion according to analyst consensus published in Bloomberg on April 29, 2024; and the number of Banco Sabadell shareholders after deducting the total amount of shares included in the €340 million share buyback plan that the bank had in place on that date (estimated at 5.28 billion shares). - Estimated final EPS in 2026: estimated EPS in 2026 (adjusted for the initial exchange ratio of one share of BBVA for every 4.83 shares of Banco Sabadell) for the resulting bank (BBVA+Sabadell) of €0.30/share. This EPS takes into consideration: in the numerator, one) the sum of the estimated net earnings in 2026 of BBVA and Banco Sabadell according to analyst consensus published in Bloomberg on April 29, 2024 (€8.09 billion and €1.25 billion respectively); plus two) the synergies (assuming complete implementation) net of tax (€603 million); in the denominator, the number of shares of the resulting bank (6.86 billion shares), assuming 100 percent uptake (based on 5.28 billion Banco Sabadell shares, as mentioned above), adjusted for the indicated exchange ratio. 

²² Based on a pro-forma Basel IV fully-loaded CET1 ratio, subject to regulatory approvals.

• BBVA will continue to pursue its current shareholder return policy, whereby shareholders receive between 40 and 50 percent of the bank’s profits, with the additional option of combining cash dividends and share buybacks. Under its existing policy, BBVA has also pledged to pay out any capital that is surplus to a CET1 ratio of 12 percent²³.

²³ Based on a pro-forma Basel IV fully-loaded CET1 ratio, subject to regulatory approvals

•  The purpose of the transaction is to complement our strengths with those of Banco Sabadell. The combination represents a clear commitment to SMEs. We want to combine our experience with Sabadell’s and, together, build the best bank for all individual customers, businesses and SME clients.
• Of the remedies BBVA has submitted to the CNMC, the following are related to SMEs:
  • Regarding commercial terms and conditions, for a period of three years, BBVA is committed to:
    • Maintaining the commercial terms and conditions in postal codes with fewer than four financial institutions²⁴.
    • Furthermore, for SMEs in these postal codes new loan prices will not exceed the average price on a national level.
    • Not closing any Banco Sabadell offices specializing in businesses anywhere in Spain.
  • As for remedies to guarantee lending for SMEs throughout Spain, BBVA is committed for a period of 18 months, except in case of financial deterioration, to²⁵:
    • Ensuring the continuity of all working capital lines (loans with a termination or renewal period equal or less to one year) that Banco Sabadell had in place in Spain.
    • Maintaining all credit volume for SMEs that only have BBVA or Banco Sabadell as a financial provider.

²⁴ For competition purposes, BBVA and Banco Sabadell are considered a single bank.

²⁵ Unless there is financial deterioration.

• Following the transaction, BBVA estimates that the resulting bank will be able to lend roughly €5 billion more each year to both households and businesses.
• Customers of both banks will benefit from a better value proposition, given the complementarity of both franchises, a wider range of products and the bank’s global reach.
• Furthermore, Banco Sabadell's customers also stand to benefit from a new network of branches and ATMs with a greater presence across the country. Specifically, the combination of the two banks would result in a group with nearly 7,000 branches worldwide, of which over 2,700 would be in Spain (even after post-merger closures). This is more than double the number of branches Sabadell currently operates. Additionally, the new bank would have over 7,000 ATMs in Spain, nearly three times as many as Sabadell on its own.
• The increased scale of the new bank will pave the way for further investments in the development of new capabilities, resulting in a better and more innovative range of products.
• The greater diversification and strength of the combined entity will make it more resilient to adverse macroeconomic events, and better able to support its customers when they need it the most.
• In addition, Banco Sabadell clients will be better able to expand their businesses into wider international markets within the BBVA footprint. This will bring them fresh business opportunities and boost their potential for growth.