Banco Sabadell is intensifying its competitive stance against BBVA as it prepares to announce an extraordinary dividend payment totaling EUR500 million. This strategic move follows the bank's commitment to distribute EUR2.9 billion to its shareholders over the next two years, representing approximately 25% of its market capitalization. The announcement is expected during the annual results presentation, where the bank intends to highlight its capital surplus and plans to reward its investors. This initiative is a direct response to BBVA's ongoing hostile takeover bid, compelling the latter to reassess its offer. In a related development, Banco Sabadell recently made headlines by moving its headquarters back to Catalonia, a politically charged decision that may influence the dynamics of the takeover bid. Due to regulations governing takeover bids, the bank's board is limited in its ability to act independently and must present this extraordinary dividend proposal at an upcoming shareholder meeting, typically held in March. Additionally, the proposal will require approval from the European Central Bank (ECB) before any payouts are made. This will mark the first occasion that Banco Sabadell has distributed excess capital through an extraordinary dividend. The bank has set a target capital ratio of 13%, and recent reports show it closed the last quarter with a fully loaded CET1 ratio of 13.8%. This figure already accounts for a 0.5% countercyclical capital buffer mandated by the Bank of Spain for this year, positioning Banco Sabadell among the Spanish banks with the highest capital surplus. As of the end of the third quarter, the bank reported a capital surplus of EUR639 million, with analysts estimating this amount at around EUR500 million. To facilitate this distribution, Banco Sabadell plans to employ a combination of share buybacks and cash payments. This latest initiative reinforces the bank's promises to its shareholders. In October, it issued a preliminary dividend of EUR0.08 per share, amounting to EUR400 million. Furthermore, the bank has set a payout ratio of 60%. Consistent with its past practices, it is also expected to propose a complementary dividend based on the 2024 financial results, which traditionally matches the ordinary dividend, potentially resulting in another EUR400 million payout. Alongside these efforts, Banco Sabadell aims to resume a suspended share buyback program valued at EUR250 million, which also requires shareholder approval. Collectively, these initiatives aim to fulfill the bank's commitment to distribute EUR2.9 billion to its shareholders, averaging EUR1.45 billion annually. Recent indications from Banco Sabadell's management, led by CEO César González-Bueno, suggest that they may increase the proposed EUR2.9 billion distribution in the upcoming results announcement. In July, during the first half results presentation, the bank raised its distribution estimate from EUR2.4 billion to EUR2.9 billion by including the previously halted share buybacks and benefiting from improved forecasts under the new European Basel III capital regulations. The bank also experienced a windfall of EUR356 million from a legal victory against Cerberus concerning the sale of toxic asset portfolios. Analysts project that the total distribution to shareholders over the next two years could reach EUR3.1 billion. This figure includes an estimated EUR571 million complementary dividend, EUR250 million from the share buyback, and various other payouts based on the 2024 and 2025 fiscal results. Consequently, this would yield a return equivalent to 25% of the bank's market value, with expectations of buying back up to 5% of its share capital in the first half of the year. In response to these developments, BBVA recently adjusted its takeover bid parameters, modifying its conditions to focus on voting rights rather than ownership percentages, thereby excluding treasury shares from calculations. This shift underscores the ongoing dividend rivalry between the two banks. Following Banco Sabadell's substantial dividend increase in October, BBVA retaliated by announcing its highest dividend ever of EUR0.29 per share, which is 81% higher than the previous year. BBVA typically issues two dividends annually, with the spring dividend often doubling the autumn payout. Historically, the bank has maintained a payout ratio of 40% to 50% of its profits, and any decision to issue a complementary dividend must also be factored into its takeover offer conditions. As the competitive landscape evolves, the financial maneuvers and shareholder incentives from both banks will play a pivotal role in shaping the outcome of this high-stakes takeover bid, highlighting the intertwined nature of corporate strategy and shareholder engagement.