4. Allocation of earnings and the new system of shareholder remuneration
New scheme for shareholder remuneration -
The new shareholder remuneration scheme called the “Dividend Option” was implemented in 2011 through two share capital increases charge to voluntary reserves approved by the Bank’s Shareholders’ Annual General Meeting held on March 11, 2011, as the fifth point of the Agenda. Under the new scheme, BBVA has offered its shareholders the chance to receive part of their remuneration in the form of free shares; however, they can still choose to receive it in cash by selling the rights assigned to them in each capital increase either to BBVA (by the Bank exercising its commitment to repurchase the free allotment rights) or on the market.
Shareholder remuneration in 2011 -
In 2011, the following payments were made and settled to shareholders:
- A third interim dividend on 2010 earnings was paid and settled on January 10, 2011 for a gross amount of €0.09 per share (€0.0729 net).
- To implement the "Dividend Option", the first capital increase charged to voluntary reserves was carried out in April 2011. As a result, the Bank’s share capital increased by €29,740,199.65, through the issue and circulation of 60,694,285 shares with a par value of €0.49 each (see Note 27). The Bank also acquired 909,945,425 pre-emptive subscription rights, at the guaranteed fixed price of €0.149 gross each, for a total of €135,581,868.33.
- An interim dividend on 2011 earnings was paid and settled on July 8, 2011 for a gross amount of €0.10 per share (€0.081 net).
- The second capital increase charged to voluntary reserves under the “Dividend Option” program was carried out in October 2011. As a result, the Bank’s share capital increased by €38,422,617.94, through the issue and circulation of 78,413,506 shares with a par value of €0.49 each (see Note 27). The Bank also acquired 433,637,066 pre-emptive subscription rights, at the guaranteed fixed price of €0.10 gross each, for a total of €43,363,706.60.
On December 20, 2011, the Board of Directors agreed to pay a second interim dividend on 2011 earnings for a gross amount of €0.10 (€0.079) per share. It was paid to the shareholders on January 10, 2012.
Dividends -
The aggregate amount of the interim dividends declared as of December 31, mentioned above, net of the amount collected by the BBVA Group companies, was €937 million and was recognized under the heading “Stockholders’ funds - Dividends and remuneration” in the accompanying consolidated balance sheet.
The provisional financial statement prepared by Banco Bilbao Vizcaya Argentaria, S.A. for 2011 in accordance with legal requirements evidenced the existence of sufficient earnings for the distribution of the amounts to the interim dividend, as follows:
| Available amount for interim dividend payments | Millions of Euros | |
|---|---|---|
| May 31, 2011 | November 30, 2011 | |
| Profit at each of the dates indicated, after the provision for income tax | 976 | 1,969 |
| Less - | - | - |
| Estimated provision for Legal Reserve | (6) | (40) |
| Acquisition by the bank of the free allotment rights in 2011 capital increase | (136) | (179) |
| Interim dividends for 2011 already paid | - | (455) |
| Maximum amount distributable | 834 | 1,295 |
| Amount of proposed interim dividend | 455 | 490 |
| BBVA cash balance available to the date | 1,540 | 1,321 |
The table below shows the allocation of the Bank's earnings for 2011 that the Board of Directors will submit to approval by the General Shareholders' Meeting:
| Allocation of Earnings | Millons of Euros |
|---|---|
| 2011 | |
| Net income for year of 2011 (*) | 1,428 |
| Distribution: | |
| Interim dividends | 945 |
| Acquisition by the bank of the free allotment rights(**) | 179 |
| Legal reserve | 41 |
| Voluntary reserves | 263 |