4. Shareholder remuneration system and allocation of earnings
Shareholder remuneration system
During 2011, 2012, 2013 and 2014, a shareholder remuneration system called the “Dividend Option” was implemented.
Under this remuneration scheme, BBVA offers its shareholders the opportunity to receive part of their remuneration in the form of new ordinary shares; however, they can still choose to receive it in cash by selling their free allocation rights to BBVA (in execution of the commitment assumed by BBVA to acquire the free allocation rights attributed to the shareholders at a guaranteed fixed price) or by selling their free allocation rights on the market at the prevailing market price at that time.
On March 25, 2015, the Executive Committee approved the execution of the first of the capital increases charged to reserves as agreed by the AGM held on March 13, 2015 to implement the Dividend Option. As a result of this increase, the Bank’s common stock increased by €39,353,896.26 (80,314,074 shares at a €0.49 par value each). 90.31% of shareholders opted to receive their remuneration in the form of ordinary shares of BBVA (see Note 25). The other 9.69% of the right owners opted to sell the rights assigned to them to BBVA, and as a result, BBVA acquired 602,938,646 rights for a total amount of €78,382,023.98; said shareholders were paid in cash at a gross fixed price of €0.13 per right, registered in “Total Equity- Dividends and remuneration” of the consolidated balance sheet as of December 31, 2015.
On September 30, 2015, the Executive Committee approved the execution of the second of the capital increases charged to reserves as agreed by the AGM held on March 13, 2015 to implement the Dividend Option. As a result of this increase, the Bank’s common stock increased by €30,106,631.94 (61,442,106 shares at a €0.49 par value each). 89.65% of shareholders opted to receive their remuneration in the form of shares. The other 10.35% of the right owners opted to sell the rights assigned to them to BBVA, and as a result, BBVA acquired 652,564,118 rights for a total amount of €52,205,129.44, said shareholders were paid in cash at a gross fixed price of €0.08 per right, registered in “Total Equity- Dividends and remuneration” of the consolidated balance sheet as of December 31, 2015.
Dividends
At its meeting of July 1, 2015, the Board of Directors of BBVA approved the payment of an interim cash dividend against 2015 earnings of €0.08 gross (€0.0644 net) per outstanding share. This amount was paid on July 16, 2015.
At its meeting of December 22, 2015, the Board of Directors of BBVA approved the payment of an interim cash dividend against 2015 earnings of €0.08 gross (€0.0648 net) per outstanding share to be paid on January 12, 2016.
The expected financial statements prepared in accordance with legal requirements evidenced the existence of sufficient liquidity for the distribution of the amounts to the interim dividend, as follows:
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| Available Amount for Interim Dividend Payments | Millions of euros | |
|---|---|---|
| May 31, 2015 |
November 30, 2015 |
|
| Profit of BBVA, S.A. at each of the dates indicated, after the provision for income tax | 1,596 | 1,981 |
| Less - |
|
|
| Estimated provision for Legal Reserve | 13 | 19 |
| Acquisition by the bank of the free allotment rights in 2015 capital increase | 78 | 131 |
| Additional Tier I capital instruments remuneration | 96 | 212 |
| Interim dividends for 2015 already paid | - | 504 |
| Maximum amount distributable | 1,408 | 1,115 |
| Amount of proposed interim dividend | 504 | 509 |
| BBVA cash balance available to the date | 3,360 | 2,870 |
The first amount of the 2015 interim dividend which was paid to the shareholders on July 16, 2015, after deducting the treasury shares held by the Group’s entities, amounted to €504 million, and was recognized under the heading “Stockholders’ funds – Dividends and remuneration” of the consolidated balance sheet as of December 31, 2015.
The dividend which was paid to the shareholders on January 12, 2016, after deducting the treasury shares held by the Group’s companies, amounted to €506 million and was recognized under the heading “Stockholders’ funds - Dividends and remuneration” of the consolidated balance sheet as of December 31, 2015.
The allocation of earnings for 2015 subject to the approval of the Board of Directors at the Annual Shareholders Meeting is presented below:
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| Allocation of Earnings | Millions of euros |
|---|---|
| 2015 | |
| Profit for year (*) | 2,864 |
| Distribution: |
|
| Interim dividends | 1,014 |
| Acquisition by the bank of the free allotment rights(**) | 131 |
| Additional Tier 1 securities | 212 |
| Legal reserve | 19 |
| Voluntary reserves | 1,488 |