• The management body concludes that the revised offer continues to undervalue Banco Sabadell as an independent entity and its future prospects
  • The Institution raises its total remuneration target charged to 2025 earnings from €1.30bn to €1.45bn, thanks to the positive performance of the business, earnings and capital generation
  • It has also announced the distribution of a second interim cash dividend of 7 euro cents per share on 29 December which, when added to the dividend distributed in August, offers a return of 4.25%
  • The amount of shareholder remuneration expected to be paid by Banco Sabadell over the next three years is considerably more than the proposal put forward by BBVA, which offers up to 28% less in distributions of dividends and capital
  • The Board warns that the maximum percentage of BBVA’s share capital that would correspond to Banco Sabadell shareholders if the hostile takeover bid is successful has fallen from the initial 16.2% to 15.3%
  • Sabadell has an upside potential of up to 26%, according to the various valuation methods
  • Any Banco Sabadell shareholder who rejects the tender offer will remain a shareholder and therefore receive any dividends agreed going forward, including the extraordinary dividend of 50 euro cents per share
  • If BBVA’s offer is taken up by between 30% and 50% and it wishes to continue with the process, it will need to launch a second cash tender offer and any Sabadell shareholders who accept the current offer will have to pay taxes but will not receive any cash

30 September 2025

The Board of Directors of Banco Sabadell once again advises its shareholders to reject the revised offer for a share exchange put forward by BBVA, as it continues to undervalue Banco Sabadell as an independent entity, as well as its future prospects. The Board bases its arguments on the fact that the price offered by BBVA is significantly lower than what Sabadell can offer as a standalone entity in the future. It has warned shareholders that there are risks if they take up the offer, and it notes that the amount of shareholder remuneration that Banco Sabadell plans to pay out over the next three years is considerably more than the proposal put forward by BBVA, which offers up to 28% less in distributions of dividends and capital.

The Institution’s management body has emphasised that, under the leadership of its current management, Banco Sabadell has consistently exceeded its financial targets over the last five years, which lends great credibility to its future objectives. Banco Sabadell’s share price has risen by 90% in these seventeen months (compared to 49% for BBVA in the same period). According to the various valuation methods, Banco Sabadell has an upside potential of up to 26%.

Higher shareholder remuneration

As a result of all the above and after continuously monitoring performance during the financial year, based on the positive development of the business, earnings and capital generation, the Board of Directors of Banco Sabadell has decided to approve a 150 million euro increase in the shareholder remuneration target charged to 2025 earnings, raising it from its current level of 1.3 billion euros to 1.45 billion euros.

This way, the estimated shareholder remuneration target for 2025-2027 rises to 6.45 billion euros, representing close to 40% of Banco Sabadell’s current market value. BBVA’s offer translates into shareholder remuneration between 21% and 28% less than what Banco Sabadell plans to pay out as a standalone entity.

The Board of Directors of Banco Sabadell has also approved the distribution of a second interim cash dividend from this year’s earnings, for a gross amount of 7 euro cents, to be paid out on 29 December. The share buyback programmes will continue to be used as a capital distribution tool.

This next dividend, when added to the interim dividend distributed last August, offers a return of 4.25% as at close of trading on 29 September. In contrast, the interim dividend announced by BBVA offers a return of just 1.99% as at that same date. Therefore, Banco Sabadell’s ordinary remuneration to its shareholders paid out of this year’s earnings is more than double that announced by BBVA.

The Bank’s Board of Directors is announcing this increase now in order to keep shareholders informed during the acceptance period of the hostile takeover bid launched by BBVA and after verifying that its performing loans have increased by 6.4% year-on-year up to August 2025 excluding TSB.

This has enabled the CET1 ratio to stand at 13.70% in August 2025, generating 70 basis points of capital during the first eight months of the financial year, in addition to the capital already deducted and associated with the shareholder remuneration policy through the distribution of a 60% payout. Cumulative attributed net profit as at August 2025 is 1,262 million euros, representing profitability, measured as RoTE, of 15.1%.

Banco Sabadell’s estimates up to 2027 include reaching RoTE in the region of 16% and growing its business, which will allow cumulative shareholder distributions of 6.45 billion euros between 2025 and 2027, a percentage amply above market consensus expectations for comparable listed companies and for BBVA, as well as annual total shareholder return of around 15%, according to the directors’ report.

The revised offer is below the initial one

The report concludes that the revised offer is less than the initial one.

It signals that the exchange ratio on which the offer price is based does not reflect the increase in the intrinsic value of Banco Sabadell’s shares and, therefore, the maximum percentage of BBVA’s share capital that would correspond to Banco Sabadell shareholders if the hostile takeover bid is successful has fallen from 16.2% to 15.3%.

In addition, Sabadell’s fundamental valuation, according to the Gordon Growth Model and assuming RoTE of 16%, cost of capital of 10-11% and a growth rate in perpetuity of 2%, stands between 12% and 23% more than the value of the offer, even before factoring in the control premium.

Risk of a second mandatory tender offer

If BBVA were to waive the acceptance condition and acquire 30% or more of the voting rights of Banco Sabadell, it would be obliged to submit a second tender offer, within one month, for all of the shares not acquired. That second bid would need to be in cash, with no conditions and at a fair price that would be set according to that set forth in the regulations governing takeover bids. This is a future market price which, by definition, cannot be known at this time, so it creates a great deal of uncertainty.

Any shareholders who had taken up the current offer and were already BBVA shareholders would lose any benefits offered by that potential second offer. Furthermore, the Board has warned that, if it came to that second tender offer, BBVA might need to reduce its future dividends by up to 12 billion euros or increase its capital by up to 12 billion euros in order to cover it, which could dilute the value of BBVA’s shares and result in them losing market value.

Payment of taxes and loss of dividends

The nature of the offer has also changed and it now consists of a pure share exchange. As such, the Board warns Banco Sabadell shareholders that they will only be eligible for tax neutrality if the offer is accepted by more than 50% of the voting rights. This means that, if BBVA waives the acceptance condition because of failing to reach the requisite majority, any retail shareholders (natural or legal persons) resident in Spain who accept the offer will not be able to defer taxation on the exchange.

To sum up, those with unrealised gains on the Banco Sabadell shares they deliver would have to pay capital gains tax when filing their tax return and, given that the revised offer does not include any cash component, those shareholders would need to have additional liquidity to pay that tax.

According to the data available to Banco Sabadell regarding shareholders who have their shares deposited with the Institution, approximately 97% of retail shareholders who are natural persons resident in Spain would obtain capital gains if BBVA waived the acceptance condition and they had accepted the offer.

Moreover, in addition to paying tax if the number of shareholders taking up the offer is less than the requisite majority, any Banco Sabadell shareholders taking up the offer would not receive the interim dividend of 7 euro cents per share next December, nor the extraordinary dividend of 50 euro cents per share that is scheduled to be paid in early 2026.

In contrast, anyone who is a Banco Sabadell shareholder at the time of its payment will receive that dividend.

Furthermore, it is worth remembering that the Institution will continue trading on the stock exchange, even if BBVA acquires more than 50% of its capital, as a merger between both banks will not be possible until after three to five years. Banco Sabadell’s Board of Directors considers that the value of outstanding shares held by retail shareholders would continue to be higher than that of other companies currently listed on the IBEX-35 and they have ample liquidity to buy and sell shares on the market.

Emerging markets and capital inefficiencies

The Board of Directors further reiterated the risks arising from BBVA’s concentration of business in emerging markets, which entail capital costs, structural and sustained currency depreciation, as well as considerable geopolitical risk, a combination that could affect its future profits.

It also pointed out that the transaction will generate significant capital inefficiencies for BBVA, which could put downward pressure on its share price. If it fails to acquire the entire share capital of Banco Sabadell in its offer, as is likely, BBVA will not be able to fully include the book value of the capital held by any Banco Sabadell shareholders who reject the offer (minority interests) in its CET1.

At the same time, its bigger size could prompt the authorities to impose a more demanding capital buffer requirement on it, which could affect its ability to remunerate shareholders.

Equally, as was reflected in the previous directors’ report, the Board warned that anyone who chooses to accept the offer will face a period of between 10 days and one month during which their shares will not be liquid. Whatever happens in the markets, they will not be able to trade with those shares from the time the offer’s acceptance period ends until the time BBVA delivers them their new shares.