Banco Bilbao (BBVA) Risk Analysis

The Group has acquired and sold several companies and businesses over the past few years. For additional information on certain recent and ongoing transactions, see "Item 4. Information on the Company-History and Development of the Company-Capital Expenditures" and "Item 4. Information on the Company-Other Relevant Information". On May 9, 2024, BBVA announced its decision to launch the Exchange Offer, a voluntary exchange offer for the acquisition of all of the issued and outstanding shares of the Target Company, with the intention of promoting, after completion of the Exchange Offer, a merger by absorption of the Target Company by BBVA (the "Merger"), unless market conditions at the time of the decision or any other relevant circumstances make it inadvisable to carry out such Merger on such terms or at such time. The Group may not complete the Exchange Offer, the intended Merger or any other ongoing or future transaction in a timely manner, on a cost-effective basis or at all. The Exchange Offer is subject to CNMV Clearance (as defined herein) and to several conditions, including Antitrust Clearance and the Minimum Acceptance Condition (each as defined herein), and there can be no assurance that these conditions will be satisfied in a timely manner or at all. If any of these conditions are not satisfied and, if applicable, BBVA does not waive such condition, BBVA will not be able to complete the Exchange Offer. Similarly, if the Exchange Offer is completed, regardless of the percentage of Target Company shares acquired by BBVA pursuant to the Exchange Offer, the consummation of the Merger would require the formulation of a joint merger plan by BBVA's and the Target Company's respective boards of directors, approval of such plan by BBVA's and the Target Company's respective shareholders and the prior authorization of the Spanish Ministry of Economy, Trade and Business. If any of the foregoing corporate approvals or the authorization from the Economy, Trade and Business Minister is not obtained, the Merger will not be consummated. Further, the Exchange Offer is not conditional on obtaining clearance or non-opposition from certain antitrust authorities and various competent regulatory bodies for the acquisition of control over regulated subsidiaries of the Target Company. If any of such governmental and regulatory approvals and authorizations are not obtained, and the Exchange Offer is completed, BBVA may ultimately be subject to fines or other administrative sanctions, may be required to make certain divestitures, may lose certain licenses held by subsidiaries of the Target Company or may have its voting rights with respect to the affected subsidiaries suspended. Even if completed, the Exchange Offer, the Merger or any other ongoing or future transaction may not have the expected results. If the Exchange Offer is completed, BBVA cannot guarantee that some or all of the expected benefits of the transaction, including expected cost and financing synergies, will be achieved. In addition, if the Exchange Offer were to be completed but BBVA were unable to complete the Merger subsequently, this could impede the integration of BBVA's operations with those of the Target Company and thereby make it more difficult to achieve the costs savings and other operating efficiencies envisaged. If the Merger were not consummated for any reason, BBVA believes that it is unlikely to achieve the full cost savings and other operating efficiencies or to realize the revenue and earnings growth that might otherwise be possible. Additionally, such cost savings and other operating efficiencies and revenue and earnings growth may be realized more slowly. However, if the Merger were not consummated, BBVA believes that it will be able to capture the majority of the cost synergies that would be realized if the Merger were consummated because BBVA will still be able to centralize certain processes of the Target Company within BBVA and to operate both banks from a joint IT platform with multi-bank functionality for all products, services and systems. Moreover, acquisitions are inherently risky because of the difficulties that may arise in integrating people, operations and technologies. There can be no assurance that any of the businesses the Group acquires can be successfully integrated or that they will perform well once integrated. In addition, if completed, the Group's results of operations could be adversely affected by acquisition- or divestiture-related charges and contingencies. The Group may also be subject to litigation in connection with, or as a result of, the Exchange Offer or other acquisitions or divestitures, including claims from terminated employees, customers or third parties. In the case of an acquisition, the Group may be liable for potential or existing litigation and claims related to an acquired business, including because either the Group is not indemnified for such claims, or the indemnification is insufficient. Further, in the case of a divestiture, the Group may be required to indemnify the buyer in respect of similar or other matters, including claims against the divested entity or business. In the case of an acquisition, even though the Group reviews the companies it plans to acquire, it is often not possible for these reviews to be complete in all respects, and there may be risks associated with unforeseen events or liabilities relating to the acquired assets or businesses that may not have been revealed or properly assessed during the due diligence processes, resulting in the Group assuming unforeseen liabilities or an acquisition not performing as expected. In deciding to make the Exchange Offer, evaluating its risks and merits and determining the terms and conditions thereof, BBVA did not have access to non-public information regarding the Target Company. BBVA has instead conducted its analysis on the Target Company using solely publicly available information, assuming the accuracy and material completeness thereof. The absence of access to non-public information regarding the Target Company necessarily limits BBVA's ability to accurately anticipate and evaluate the consequences of completing the Exchange Offer, including any losses, costs or other liabilities that may be incurred as a result thereof. For example, without access to non-public information regarding the Target Company, BBVA may have failed to discover liabilities, contingent or otherwise, or operating or other matters relating to the Target Company's business that are not disclosed in publicly available information concerning the Target Company. Any such undisclosed liabilities or matters could require significant effort and expense to address and could ultimately have an adverse effect on BBVA's business, financial condition, results of operations and prospects. Furthermore, completion of the Exchange Offer may constitute a breach or default under agreements or instruments of the Target Company, or otherwise result in the acceleration of obligations (including, without limitation, payment obligations) or changes to rights thereunder or the termination thereof. The Target Company (and the Group, given the Target Company would then be a member of the Group) may incur liabilities relating to any such breach or default and may also be unable to replace a terminated agreement or instrument on comparable terms or at all, in the event such a replacement is deemed necessary. Depending on the importance of a terminated agreement or instrument to the Target Company's business, failure to replace that agreement or instrument on similar terms or at all may increase the costs to BBVA of operating the Target Company's business or prevent BBVA from operating part or all of the Target Company's business. Additionally, while BBVA has assumed the accuracy and completeness of publicly available information concerning the Target Company, such information may contain errors or omissions. Since BBVA was not involved in the preparation of such information, it cannot give assurance that such information is accurate and complete. Any errors or omissions in the information publicly available to BBVA relating to the Target Company may have affected BBVA's analysis and estimations of the risks and merits of the Exchange Offer (including BBVA's assumptions with respect to the future operations, profitability, asset quality and other matters relating to the Target Company, including the anticipated synergies expected to result from the Exchange Offer), its decision to make the Exchange Offer and its determination of the terms and conditions thereof. As a result of the foregoing, BBVA may not have anticipated all losses, costs and other liabilities that may be incurred in connection with the Exchange Offer if the Exchange Offer is completed or may have failed to accurately analyze or estimate the consequences of completing the Exchange Offer, either of which could have an adverse effect on the Group's business, financial condition and results of operations after completion of the Exchange Offer. Acquisitions may also lead to potential write-downs or have consequences that adversely affect the Group's results of operations. For example, uncertainty about the effect of the Exchange Offer on BBVA's and/or the Target Company's (as a future member of the Group) employees and customers could adversely affect BBVA's or the Target Company's ability to retain and motivate its key personnel until and after the Exchange Offer is completed and could cause customers, suppliers, licensees, partners and other third parties that deal with BBVA or the Target Company to defer from entering into contracts with BBVA or the Target Company or to make other decisions that adversely affect BBVA or the Target Company, including the termination of existing business relationships with BBVA or the Target Company. In addition, if the Exchange Offer is not completed, the market prices of BBVA securities may decline or otherwise be subject to fluctuations to the extent that the current market prices of BBVA securities reflect a market assumption that the Exchange Offer will be completed. In addition, the failure to complete the Exchange Offer may result in negative publicity or affect BBVA's reputation in the investment community and may affect BBVA's relationship with employees, clients and other partners in the business community. Following completion of the Exchange Offer, BBVA will be exposed to other risk factors specific to the Target Company's business or otherwise arising from the Exchange Offer. Any of the foregoing may cause the Group to incur significant unexpected expenses, may divert significant resources and management attention from the Group's other business concerns, or may otherwise have a material adverse effect on the Group's business, financial condition and results of operations.