Banco Popular Espanol : Information concerning the capital increase approved by the Board of Directors

f5519e40-32eb-4d4d-8a21-9db629618a95.pdf

Madrid, 26th May 2016

COMISIÓN NACIONAL DEL MERCADO DE VALORES

In accordance with article 228 of the Spanish securities market act (Ley del Mercado de Valores) BANCO POPULAR ESPAÑOL, S.A. ("Banco Popular" or the "Company"), issues the following significant event notice.

SIGNIFICANT EVENT NOTICE

The Company announces that, as a result of the resolutions passed by the board of directors of

the Company at

the meeting held yesterday, 25

May 2016,

and at the ordinary

general

shareholders' meeting held on 11 April 2016, it has been agreed

o increase the share capital of

Banco Popular, for cash consideration and with pre-emption rights for the Company's shareholders on the following terms (the "Rights Issue"):

1. Rights Issue amount, sub cription price and shares to be issued

   The Rights Issue is for a nominal amount of €1,002,220,576.50, t

   rough the issue and placing of

   2,004,441,153 new ordinary shares in Banco Popular each with a nominal value of €0.50, of the same class and series as currently issued shares and in book entry form (the "New Shares").

   The New Shares will be issued for their

   nominal value of €0.5

   per share, plus a unit share

   premium of €0.75, which gives a subscription price o

   €1.25 per each New Share. Including the

   subscription price, the Rights Issue will be for a total actual amount of €2,505,551,441.25 if fully subscribed or the resulting amount if, as the case may be, the issue is not fully subscribed.

   The New Shares will be paid up for cash consideration and Banco Popular's shareholders have a right of pre-emption over the New Shares that are issued.

   The New Shares will give holders the same rights as the currently issued shares upon registration

   in the accounting records of Sociedad de Gestión de los Sistema Liquidación de Valores, S.A.U. ("Iberclear").

   de Registro, Compensación y

2. Targets and right of pre-emption

   The Rights Issue is directed at shareholders in the Company who acquired shares up to the date

   on which the announcement

   of the Rights Issue

   is publishe

   in the BORME and

   whose

   transactions were settled at Iberclear up to three trading days after (Record Date) (both inclusive). Each existing share in Banco Popular confers a right of pre-emption. Fourteen (14) pre-emption

   rights

   will be needed to subscribe for thirteen (13)

   New Shares. Pre-emption rights

   will be

   transferable on the same terms as the shares from which they arise and can be traded on the

   Madrid, Barcelona, Bilbao and Valencia

   Stock Exchanges through the Automated Quotation

   system, Sistema de Interconexión Bursátil ("Mercado Continuo"). Accordingly, those investors that acquire pre-emption rights on the market may also subscribe for New Shares.

   The pre-emption period will have a duration of 15 calendar days from the

   date on which the

   relevant announcement of the Rights Issue is published in the BORME. Pre-emption rights will be traded in the sessions from and to those dates inclusive.

   Pre-emption rights that are not exercised shall automatically lapse at the end of the pre-emption period.

   If the maximum amount of the Rights Issue that can be subscribed is not fully subscribed during the pre-emption period, the shareholders and investors who fully exercise their pre-emption rights during that period may, in addition, request to subscribe for additional New Shares. The orders for

   exercising the pre-emption rights and the requests fo

   additional New Shares will be considered

   unconditional and irrevocable. If requests to subscribe for additional New Shares are not sufficient to cover the maximum amount of the Rights Issue, the remaining New Shares may be allotted on a discretionary basis to qualified investors.

3. Placement and underwriti g of the New Shares

   The Company has today entered into a placement and underwriting agreement with UBS Limited as Sole Global Coordinator and Joint Bookrunner; and Goldman Sachs International as Co-Global Coordinator and Joint Bookrunner. The Company may appoint additional underwriters that would adhere to the placement and underwriting agreement (the additional underwriters together with the aforementioned entities, the "Managers"). The Company would inform the markets and the CNMV of such appointments as soon as possible by way of significant event notice. Under the placement

   and underwriting

   agreement, the New Shares that are not subscribed for in the discretionary

   allocation period have been underwritten by the Managers, subject to certain conditions customary in this type of transactions and except for those New Shares subject to an irrevocable subscription undertaking by Allianz SE, as described below.

   Certain members

   of the board of directors of Banco Popular have declared their inte

   tion to

   participate in the Rights Issue and Allianz SE, a significant sharehol er of the Company represented

   at the board of directors, has committed to subscribe

   or the number of New Shares that may be

   necessary for keeping a 3% stake in the share capital of the Company after completion of the Rights Issue (which implies that it will subscribe for at least 53,390,241 New Shares). Currently, Allianz SE holds 72,515,501 shares representing approximately 3.31% of the share capital of Banco Popular.

4. Admission to trading

   Banco Popular will request the admission to trading of the New Shares on the Madrid, Barcelona,

   Bilbao

   and Valencia Stock Exchanges through the

   Automated

   Quotation

   System ("Mercado

   Continuo").

5. Purpose of the Rights Issue

   The Rights Issue

   seeks to strengthen Banco Popular's balance sheet and improve

   oth its

   profitability ratios and its solvency levels and asset quality.

   With the proceeds of the Ri

   hts Issue,

   Banco Popular will reinforce its strong franchise and

   business model and move forward more firmly in its commercial and retail business model (which

   is based on SMEs and self-employed

   individuals

   inancing and consumer financing), seize

   opportunities for growth that may be available and, at the same time, accelerate the progressive reduction of non-performing assets.

   After

   the Rights

   Issue, the

   Company will be in a

   better posi ion to meet future regulatory

   requirements and address certain uncertainties that could significantly affect the estimates used in the preparation of its financial statements. Should the e uncertain ies materialize fully or partially,

   the Company estimates that it could need to reinforce its coverage levels

   during 2016 by an

   approximate amount of up to €4.7 billion, a 12 basis points increase, in line with the industry average. If this were to occur, it is probable that the results of the Company for 2016 would be a loss, which would be entirely covered by the proceeds of the Rights Issue in terms of solvency as well as by the temporary suspension of its dividend payments, so that Banco Popular can face the

   uncertainties referred to above in as solid a position as possible. This

   strategy would be

   complemented by

   a progressive reduction of the

   Company's

   non-performing assets.

   Banco

   Popular expects to resume dividend payments (both in cash and script) as

   soon as the Group

   reports positive quarterly consolidated results in 2017, subject to regulatory authorizations. The

   Company has set a cash pay-out ratio target of at least 40% for 20 8.

6. Note relating to the Share

   The terms and conditions of the Rights Issue and the procedure for subscribing for and paying up

   the New Shares

   will be set out in the Note relating to the Sh

   res and the Summary that is

   expected to be approved and registered by the CNMV in the coming days and which together with Banco Popular 2015 Registration Document, already registered with CNMV on 10 May 2016, form the prospectus relating to the public offering and the admission to trading of the shares to be issued in the context of the Rights Issue.

   Once approved and registered by the CNMV, the Note relating to the Shares and the Summary will be made available to the public on the websites of the CNMV (www.cnmv.es) and Banco Popular (www.grupobancopopular.com).

7. Investor Presentation

The investor presentation prepared for the Rights Issue is attached as appendix of this significant event notice.

Sincerely,

Francisco Aparicio Valls

Secretary of the board of directors

The information contained herein is not for release, publication or distribution, directly or indirectly, in or into the United States, Canada, Australia or Japan or any other jurisdiction in which the distribution or release would be unlawful.

These written materials do not constitute an offer to sell, or a solicitation of offers to purchase or subscribe for, securities in the United States. The securities referred to herein have not been, and will not be, registered under the Securities Act of 1933, as amended, and may not be offered, exercised or sold in the United States absent registration or an applicable exemption from registration requirements. There is no intention to register any portion of the offering in the United States or to conduct a public offering of securities in the United States.

The issue, exercise or sale of securities in the offering are subject to specific legal or regulatory restrictions in certain jurisdictions. The Company assumes no responsibility in the event there is a violation by any person of such restrictions.

The information contained herein shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein, in any jurisdiction in which such offer solicitation or sale would be unlawful. Investors must neither accept any offer for, nor acquire, any securities to which this document refers, unless they do so on the basis of the information contained in the applicable prospectus published or offering circular distributed by the Company.

Banco Popular has not authorized any offer to the public of securities in any Member State of the European Economic Area other than Spain . With respect to each Member State of the European Economic Area other than Spain and which has implemented the Prospectus Directive (each, a "Relevant Member State"), no action has been undertaken or will be undertaken to make an offer to the public of securities requiring publication of a prospectus in any Relevant Member State different from Spain. As a result, the securities may only be offered in Relevant Member States (a) to any legal entity which is a qualified investor as defined in Article 2(1)(e) of the Prospectus Directive; or ( ) in any other circumstances which do not require the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this paragraph, the expression an "offer of securities to the public" me ns the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to exercise, purchase or subscribe the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression "Prosp ectus Directive" means

Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent imple

ented in

the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

This communication is directed only at (i) persons who are outside the United Kingdom or (ii) in the United Kingdom, persons who have professional expe ience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"), or who are high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2 ) of the Order (all such

persons

together being referred to

as "relevant

persons"). Any investment

or investment

activity to which this

communication relates will only be available to and will only be engaged in with, relevant persons. Any person who is not a relevant person must not act or rely on this document or any of its contents.

Investors should not purchase (or subscribe for) any shares referred to in this announcement except on the basis of information in the Company's 2015 Registration Document and the Note relating to the Shares (together, the Prospectus) approved and registered with the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) and published by the Company in due cou se in connection with the Offering and the admission of the new shares in the capital of the Company to trading on the Spanish Stock Exchanges. The 2015 Registration Document relating to the Company was approved and registered with the Spanish National Securities Market Commiss on (Comisión Nacional del Mercado de Valores) on 10 May 2016 and is available to investors on the website of the CNMV (www.cnmv.es) and of the Company

(www.grupobancopopular.com). The

ote relating to the Shares and the Summary are pending approval and registration

with the CNMV. Once approved and registered, the Note relating to the Shares and the Summary will also be made available to investors on the website of the CNMV (www.cnmv.es) and of the Comp ny (www.grupobancopopular.com).