Providian’s Profit Falls on Bad Loans

Providian Financial Corp., the seventh-largest U.S. issuer of Visa and MasterCard credit cards, on Monday reported lower quarterly profit as it saw the value of bad loans and uncollectable charges rise.

The San Francisco-based firm said its third-quarter net income slipped to $42.1 million, or 15 cents per share, from $57.2 million, or 20 cents per share, a year earlier. Third-quarter profit fell 26%.

Wall Street analysts were expecting earnings of 4 cents per share, with their estimates ranging from 2 cents to 9 cents, according to research firm Thomson First Call.

Providian, which racked up huge loan losses by catering to people with poor credit histories, is cutting jobs and reorganizing to focus on better-off customers. The firm said it ended the third quarter with 7,331 full-time employees, more than 1,000 less than at the end of the second quarter.

The company also said it completed the previously announced closure of its Sacramento operations facility in the third quarter and that the planned closures of its Fairfield, Calif., and Salt Lake City facilities are on track for the fourth quarter.

Providian’s non-interest income was cut by $77.1 million because of a decline in the value of securities backed by credit card loans.

The company also raised its estimate of finance charges and fees that will go unpaid, cutting earnings.

Providian shares rose 17 cents to $4.37 on the New York Stock Exchange. The shares are up 23% this year, after falling 94% in 2001.

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Bloomberg News was used in compiling this report.