Providian Financial Corporation Reports First Quarter 2005 Earnings Re

    Business Editors

    SAN FRANCISCO--(BUSINESS WIRE)--April 25, 2005--Providian Financial Corporation (NYSE:PVN) today announced net income for the first quarter of 2005 of $133.0 million, or $0.40 per diluted share, compared to net income of $93.7 million, or $0.30 per diluted share, in the first quarter of 2004. Strong contributions were made by both interest and non-interest revenue and credit quality showed further improvement.
    "We are very pleased with the results of the first quarter of 2005," said Joseph Saunders, Providian's chairman and chief executive officer. "The progress we made establishes a solid foundation for the balance of the year. Our ultimate success in 2005 will be based on continuing to leverage our core competitive targeting and underwriting advantages while simultaneously laying the groundwork for product expansion to both existing and new customers."

    Financial Highlights -- Reported Basis

    Total net revenues on a reported basis, comprised of reported net interest income and reported non-interest income, totaled $525.1 million in the first quarter of 2005, compared to $498.5 million in the first quarter of 2004. The net interest margin on average reported loans in the first quarter of 2005 was 7.62% and the non-interest margin on average reported loans was 21.82%. The Company's risk adjusted margin on average reported loans expanded to 24.95% from 23.80% in the first quarter of 2004.
    Reported net credit losses in the first quarter of 2005 were $80.4 million, resulting in a reported net credit loss rate of 4.49%, compared to 9.02% in the first quarter of 2004. The Company's reported 30+ day delinquency rate at the end of the first quarter of 2005 was 3.15%, down 210 basis points from 5.25% at the end of the first quarter of 2004.
    Reported loans receivable at the end of the first quarter of 2005 were $7.13 billion compared to $6.19 billion at the end of the first quarter of 2004.

    Financial Highlights -- Managed Basis

    Total net revenues on a managed basis, comprised of net interest income and non-interest income from both reported and securitized loans, totaled $823.5 million in the first quarter of 2005, compared to $932.1 million in the first quarter of 2004. The net interest margin on average managed loans in the first quarter of 2005 was 12.30% and the non-interest margin on average managed loans was 6.27%. The risk-adjusted margin on average managed loans increased to 10.14% in the first quarter from 9.01% in the first quarter of 2004.
    Managed net credit losses in the first quarter of 2005 were $378.8 million, resulting in a managed net credit loss rate of 8.43%, compared to 13.88% in the first quarter of 2004. The Company's managed 30+ day delinquency rate at the end of the first quarter of 2005 was 5.16% compared to 7.36% at the end of the first quarter of 2004. Based on the ongoing improvement in the credit quality of its loan portfolio the Company is lowering its 2005 managed net credit loss guidance by $50 million, to $1.6 billion for the year.
    Managed loans receivable at the end of the first quarter of 2005 were $18.1 billion, essentially flat to the level at the end of the fourth quarter of 2004, excluding the higher-risk loans held for sale at the beginning of the first quarter of 2005.

    Other First Quarter Results

    The Company added approximately 513,000 gross new accounts in the first quarter of 2005, which was more than offset by the closure in February of approximately 530,000 inactive accounts, as well as the elimination of approximately 350,000 accounts through the higher-risk asset sale.
    Non-interest expense for the first quarter of 2005 was $261.0 million, compared to $266.0 million in the first quarter of 2004. Non-interest expense, excluding solicitation and advertising, in the first quarter was $197.6 million.
    The Company ended the first quarter of 2005 with total equity of $2.84 billion and an allowance for credit losses of $439.0 million, which together represent approximately 46% of reported loans and approximately 18% of managed loans. Cash and investments ended the quarter at approximately $4.8 billion, representing approximately 34% of total reported assets and approximately 20% of total managed assets.

    Managed Financial Information

    The Company presents financial information on both a reported and managed basis. "Reported" financial information refers to GAAP financial information while "managed" financial information is derived by adjusting the reported financial information to add back securitized loan balances and the related finance charge and fee income, credit losses, and net interest costs. The interests the Company retains in the securitized loan balances creates financial exposure to the current and expected cash flows of the securitized loans. Although the loans sold are not on the Company's balance sheet, their performance affects the Company's retained interests in the securitizations as well as its results of operations and its financial position. In addition, the Company continues to service the securitized loans.

    About Providian

    San Francisco-based Providian Financial is a leading provider of credit cards to mainstream American customers throughout the U.S. By combining experience, analysis, technology and outstanding customer service, Providian seeks to build long-lasting relationships with its customers by providing products and services that meet their evolving financial needs.

    Certain statements contained in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements include, without limitation: expressions of the "belief," "anticipation," or "expectations" of management; statements as to industry trends or future results of operations of the Company and its subsidiaries; and other statements that are not historical fact. Forward-looking statements are based on certain assumptions by management and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include, but are not limited to, competitive pressures; factors that affect liquidity, delinquency rates, credit loss rates, and charge-off rates; general economic conditions; consumer loan portfolio growth; changes in the cost and/or availability of funding due to changes in the deposit, credit, or securitization markets; changes in the way the Company is perceived in such markets and/or conditions relating to existing or future financing commitments; the effect of government policy and regulation, whether of general applicability or specific to the Company, including restrictions and/or limitations relating to the Company's minimum capital requirements, deposit-taking abilities, reserving methodologies, dividend policies and payments, growth, and/or underwriting criteria; year-end adjustments; changes in accounting rules, policies, or assumptions or in the interpretation or application of such rules, policies, or assumptions; changes to or the restatement of prior period financial statements or results as the result of accounting errors or other circumstances; the success of product development efforts; legal and regulatory proceedings, including the impact of ongoing litigation; interest rates; one-time charges; extraordinary items; the ability to recruit or replace key personnel; and the impact of existing, modified, or new strategic initiatives. These and other risks and uncertainties are described in detail in the Company's Annual Report on Form 10-K and Annual Report to Stockholders for the fiscal year ended December 31, 2004 under the headings "Cautionary Statement Regarding Forward-Looking Information" and "Risk Factors." Readers are cautioned not to place undue reliance on any forward-looking statement, which speaks only as of the date thereof. The Company undertakes no obligation to update any forward-looking statements.

    Additional information regarding the first quarter 2005 results is provided in the form of a copy of the first quarter 2005 earnings conference call script which is available on the Company's website at www.providian.com under Investor Relations.

    For more information -- Investors please call Jack Carsky at 415-278-4977. Media, please contact Alan Elias at 415-278-4189.

    Note: Investor information is available on Providian Financial's website at www.providian.com.

Providian Financial Corporation Financial & Statistical Summary Reported Financial Measures (unaudited)

------------------------------------------------ (in millions, except 2005 2004 2004 2004 2004 per share and Q1 Q4 Q3 Q2 Q1 employee data) Restated Restated Restated Restated ---------------------------------------------------------------------- Reported Earnings: Net Interest Income $ 134.3 $ 132.8 $ 139.3 $ 115.4 $ 111.7 Non-Interest Income 390.8 396.0 421.2 401.3 386.8 ------------------------------------------------ Total Net Revenue 525.1 528.8 560.5 516.7 498.5 Provision for Credit Losses 60.8 85.1 161.4 182.0 88.9 Non-Interest Expense 261.0 264.3 256.9 259.1 266.0 ------------------------------------------------ Income Before Income Taxes 203.3 179.4 142.2 75.6 143.6 Income Tax Expense 70.3 34.8 49.1 25.7 49.9 ------------------------------------------------ Net Income $ 133.0 $ 144.6 $ 93.1 $ 49.9 $ 93.7 ---------------------------------------------------------------------- Reported Financial Data: Quarter: Net Credit Losses $ 80 $ 119 $ 128 $ 150 $ 146 Provision for Credit Losses $ 61 $ 85 $ 161 $ 182 $ 89 Quarter End: Total Loans $ 7,127 $ 7,522 $ 7,307 $ 6,884 $ 6,191 Total Assets $14,047 $ 14,345 $ 13,836 $ 13,535 $ 13,450 Total Equity $ 2,844 $ 2,710 $ 2,557 $ 2,442 $ 2,401 Quarter Average: Total Loans (1) $ 7,164 $ 6,936 $ 7,340 $ 6,611 $ 6,473 Earning Assets (1) $12,027 $ 12,372 $ 11,782 $ 11,479 $ 11,778 Total Assets $14,105 $ 14,340 $ 13,622 $ 13,432 $ 13,750 Total Equity $ 2,791 $ 2,647 $ 2,502 $ 2,393 $ 2,322 ---------------------------------------------------------------------- Key Reported Statistics: Net Interest Margin on Average Earning Assets (2) 4.47% 4.29% 4.73% 4.02% 3.79% Net Interest Margin on Average Loans (3) 7.62% 8.19% 8.14% 8.39% 8.92% Risk Adjusted Margin on Average Loans (4) 24.95% 24.17% 24.10% 23.57% 23.80% Adjusted Margin on Average Loans (5) 10.10% 9.03% 8.53% 7.58% 9.12% Non-interest Income Margin (6) 21.82% 22.84% 22.95% 24.28% 23.90% Return on Average Assets 3.77% 4.03% 2.73% 1.49% 2.72% Return on Equity 19.04% 21.85% 14.89% 8.35% 16.13% Allowance as a Percent of Loans 6.16% 7.97% 8.67% 8.72% 9.19% Net Credit Loss Rate (7) 4.49% 6.86% 6.99% 9.10% 9.02% 30+ Day Delinquency Rate (8) 3.15% 4.61% 4.61% 4.74% 5.25% Equity to Assets 20.25% 18.89% 18.48% 18.04% 17.85% ---------------------------------------------------------------------- Common Share Statistics: Earnings Per Common Share - Basic $ 0.46 $ 0.50 $ 0.32 $ 0.17 $ 0.33 Earnings Per Common Share - Assuming Dilution 0.40 0.44 0.29 0.16 0.30 Book Value Per Share (Period End) $ 9.67 $ 9.23 $ 8.73 $ 8.37 $ 8.25 Total Market Capitalization (Period End) $ 5,047 $ 4,834 $ 4,552 $ 4,282 $ 3,814 Shares Outstanding (Period End) 294.1 293.5 293.0 291.9 291.2 Weighted Average Shares O/S - Basic 290.9 289.6 289.3 288.4 288.1 Weighted Average Shares O/S - Diluted 340.4 339.7 333.6 332.6 317.6 Interest on convertible senior notes, net-of-taxes 4.7 4.7 2.9 2.9 1.9

Accounts 9.4 10.3 10.3 10.3 10.3 Employees (FTE) 3,197 3,263 3,457 3,763 3,980

(1) The Q1 2005 average balances exclude loans held for securitization or sale in the amount of $183 million.

(2) Represents interest income, less interest expense, expressed as a percentage of reported average earning assets.

(3) Represents interest income, less interest expense, expressed as a percentage of reported average loans receivable. Interest expense is allocated to reported average loans receivable based on the ratio of reported average loans receivable to reported average earning assets.

(4) Represents interest income, less interest expense and net credit losses, plus non-interest income, expressed as a percentage of reported average loans receivable. Interest expense is allocated to reported average loans receivable based on the ratio of reported average loans receivable to reported average earning assets.

(5) Represents interest income, less interest expense and net credit losses, plus credit product fee income on reported average loans receivable, expressed as a percentage of reported average loans receivable. Interest expense is allocated to reported average loans receivable based on the ratio of reported average loans receivable to reported average earning assets.

(6) Represents reported non-interest income expressed as a percentage of reported average loans receivable.

(7) Represents principal amounts of reported loans receivable that have been charged off, less recoveries, expressed as a percentage of reported average loans receivable during the period; fraud losses are not included.

(8) Represents reported loans receivable that are 30 days or more past due at period end, expressed as a percentage of reported loans receivable at period end.

Providian Financial Corporation Financial & Statistical Summary Managed Financial Measures (unaudited)

------------------------------------------------ 2005 2004 2004 2004 2004 Q1 Q4 Q3 Q2 Q1 (dollars in millions) Restated Restated Restated Restated ---------------------------------------------------------------------- Managed Net Revenue: Net Interest Income $ 541.8 $ 580.1 $ 574.0 $ 557.3 $ 566.0 Non-Interest Income 281.7 275.4 312.0 334.4 366.1 ------------------------------------------------------------------- Total Net Revenue (1) $ 823.5 $ 855.5 $ 886.0 $ 891.7 $ 932.1 =================================================================== Managed Financial Data: Quarter: Net Credit Losses $ 378.8 $ 445.6 $ 453.8 $ 525.4 $ 579.6 Net Change in Reported Allowance for Credit Losses (2) (19.6) (33.8) 33.1 31.7 (57.1) ------------------------------------------------------------------- Adjusted Credit Losses $ 359.2 $ 411.8 $ 486.9 $ 557.1 $ 522.5 ===================================================================

Quarter End: Total Loans (3) $18,089 $ 18,536 $ 17,901 $ 17,245 $ 16,676 Securitized Loans (4) $10,962 $ 11,014 $ 10,594 $ 10,361 $ 10,485 Total Assets (5) $23,340 $ 23,637 $ 22,685 $ 22,196 $ 22,230 Total Equity $ 2,844 $ 2,710 $ 2,557 $ 2,442 $ 2,401 Quarter Average: Total Loans (6) $17,979 $ 17,864 $ 17,469 $ 16,778 $ 16,705 Securitized Loans (4) $10,815 $ 10,928 $ 10,129 $ 10,167 $ 10,232 Earning Assets (6) $22,842 $ 23,300 $ 21,911 $ 21,646 $ 22,010 Total Assets $23,244 $ 23,475 $ 22,077 $ 22,032 $ 22,398 Total Equity $ 2,791 $ 2,647 $ 2,502 $ 2,393 $ 2,322 ---------------------------------------------------------------------- Key Managed Statistics:

Net Interest Margin on Average Earning Assets (7) 9.49% 9.96% 10.48% 10.30% 10.29% Net Interest Margin on Average Loans (8) 12.30% 13.34% 13.46% 13.74% 14.12% Risk Adjusted Margin on Average Loans (9) 10.14% 9.53% 10.21% 9.18% 9.01% Adjusted Margin on Average Loans (10) 9.51% 9.42% 9.27% 7.44% 6.86% Non-interest Income Margin (11) 6.27% 6.17% 7.14% 7.97% 8.77% Return on Average Assets 2.29% 2.46% 1.69% 0.91% 1.67% Net Credit Loss Rate (12) 8.43% 9.98% 10.39% 12.53% 13.88% 30+ Day Delinquency Rate (13) 5.16% 6.16% 6.27% 6.44% 7.36% Equity to Managed Assets 12.19% 11.46% 11.27% 11.00% 10.80%

(1) Represents the interest income and non-interest income earned from managed loans receivable and investments less interest expense, including the interest costs payable to securitization investors.

(2) The net change in the reported allowance for credit losses excludes the allowance transferred to loans held for securitization or sale.

(3) Represents all loans receivable from customer accounts that are managed by the Company, including the loans receivable reported on the Company's statement of financial condition and the loans receivable removed or reclassified from the Company's statement of financial condition through the Company's securitizations. Loans receivable amounts exclude estimated uncollectible interest and fees.

(4) Effective December 2002, the Company adopted the federal banking agencies' accrued interest receivable, or AIR, guidance, resulting in a reclassification of a portion of accrued interest receivable from reported loans receivable to due from securitizations during 2005 and 2004. Securitized loans for 2005 and 2004 include the AIR reclassification.

(5) Managed assets represent total assets reported on the Company's statement of financial condition, plus the loans receivable removed or reclassified from loans receivable on its statement of financial condition through securitizations, less the retained interests from securitizations reported on its statement of financial condition.

(6) The Q1 2005 average balances exclude loans held for securitization or sale in the amount of $183 million.

(7) Represents interest income, less interest expense, expressed as a percentage of managed average earning assets.

(8) Represents interest income, less interest expense, expressed as a percentage of managed average loans receivable. Interest expense is allocated to managed average loans receivable based on the ratio of managed average loans receivable to managed average earning assets.

(9) Represents interest income, less interest expense and net credit losses, plus non-interest income, expressed as a percentage of managed average loans receivable. Interest expense is allocated to managed average loans receivable based on the ratio of managed average loans receivable to managed average earning assets.

(10) Represents interest income, less interest expense and net credit losses, plus credit product fee income on managed average loans receivable, expressed as a percentage of managed average loans receivable. Interest expense is allocated to managed average loans receivable based on the ratio of managed average loans receivable to managed average earning assets.

(11) Represents managed non-interest income expressed as a percentage of managed average loans receivable. Managed non-interest income excludes the interest income reclassification related to certain retained beneficial interests.

(12) Represents principal amounts of managed loans receivable that have been charged off, less recoveries, expressed as a percentage of managed average loans receivable during the period; fraud losses are not included.

(13) Represents managed loans receivable that are 30 days or more past due at period end, expressed as a percentage of managed loans receivable at period end.

Providian Financial Corporation Delinquency Summary Quarterly (unaudited)

--------------------------------------- 2005 2004 Q1 Q4 --------------------------------------- % of % of Total Total (dollars in thousands) Loans Loans Loans Loans ---------------------------------------------------------------------- Reported Loans outstanding $ 7,127,214 100.00% $ 7,522,401 100.00% Loans delinquent 30 - 59 days $ 72,377 1.02% $ 109,014 1.45% 60 - 89 days 52,116 0.73% 80,152 1.06% 90 or more days 100,139 1.40% 157,776 2.10% ----------------------------------------------------------------------

Total $ 224,632 3.15% $ 346,942 4.61% ======================================================================

Securitized Loans outstanding (1) $10,961,605 $11,013,352 Loans delinquent 30 - 59 days $ 200,858 $ 244,041 60 - 89 days 157,898 182,531 90 or more days 350,028 367,963 ------------------------------------------ -----------

Total $ 708,784 $ 794,535 ========================================== ===========

Managed Loans outstanding $18,088,819 100.00% $18,535,753 100.00% Loans delinquent 30 - 59 days $ 273,235 1.51% $ 353,055 1.90% 60 - 89 days 210,014 1.16% 262,683 1.42% 90 or more days 450,167 2.49% 525,739 2.84% ----------------------------------------------------------------------

Total $ 933,416 5.16% $ 1,141,477 6.16% ======================================================================

----------------------------------------------------------- 2004 2004 2004 Q3 Q2 Q1 ----------------------------------------------------------- (dollars in % of % of % of thousands) Total Total Total Loans Loans Loans Loans Loans Loans ---------------------------------------------------------------------- Reported Loans out- standing $ 7,306,507 100.00% $ 6,883,942 100.00% $ 6,191,078 100.00% Loans de- linquent 30 - 59 days $ 109,195 1.49% $ 106,713 1.55% $ 91,581 1.48% 60 - 89 days 79,558 1.09% 76,073 1.11% 73,418 1.18% 90 or more days 147,963 2.03% 143,225 2.08% 160,242 2.59% ----------------------------------------------------------------------

Total $ 336,716 4.61% $ 326,011 4.74% $ 325,241 5.25% ======================================================================

Securitized Loans out- standing (1) $10,594,908 $10,361,415 $10,485,261 Loans de- linquent 30 - 59 days $ 248,849 $ 251,973 $ 243,862 60 - 89 days 187,693 183,179 206,633 90 or more days 348,770 348,995 451,580 ---------------------- ----------- -----------

Total $ 785,312 $ 784,147 $ 902,075 ====================== =========== ===========

Managed Loans out- standing $17,901,415 100.00% $17,245,357 100.00% $16,676,339 100.00% Loans de- linquent 30 - 59 days $ 358,044 2.00% $ 358,686 2.08% $ 335,443 2.01% 60 - 89 days 267,251 1.49% 259,252 1.50% 280,051 1.68% 90 or more days 496,733 2.78% 492,220 2.86% 611,822 3.67% ----------------------------------------------------------------------

Total $ 1,122,028 6.27% $ 1,110,158 6.44% $ 1,227,316 7.36% ======================================================================

(1) Excludes the senior seller's interest in the loans receivable transferred in securitizations, which is included in reported loans receivable. Includes the seller's interest subordinated component, or AIR, which is reported in due from securitizations on the Company's statement of financial condition.

Providian Financial Corporation Reported and Managed Monthly Net Credit Loss and Delinquency Rates March 31, 2005

Providian Financial Corporation's reported and managed net credit loss rates for the month ended March 31, 2005 and its 30+ day reported and managed delinquency rates as of March 31, 2005 are presented in the following table (unaudited).

Reported Managed ---------- ---------

Net Credit Loss Rate (1) 5.15% 8.62% 30+ Day Delinquency Rate (2) 3.15% 5.16%

(1) Represents the principal amounts of loans receivable that have been charged off, less the total amount of recoveries on previously charged-off loans, expressed as a percentage of the average loans receivable during the period, multiplied by 12. Recoveries include proceeds from the sale of charged-off assets to third parties.

(2) Represents loans that are 30+ days past due as of the last day of the monthly period, divided by the total loans as of the last day of the monthly period.

Reported net credit loss and delinquency rates exclude the impact of loans receivable removed or reclassified from loans receivable on the Company's balance sheet through its securitizations. Managed net credit loss and delinquency rates are derived by adjusting the reported financial information to add back securitized loan balances. A reconciliation of reported and managed net credit losses, 30+ day delinquencies and loans receivable for the month ended March 31, 2005 is provided in the following table (unaudited).

(dollars in thousands) Reported Securitized(1) Managed -------------------------------- ------------------------------------ Net Credit Losses $ 30,422 $ 97,944 $ 128,366 Average Loans Receivable Balance $7,091,816 $10,784,029 $17,875,845 Net Credit Loss Rate 5.15% 8.62%

30+ Day Delinquencies $ 224,632 $ 708,784 $ 933,416 End of Month Loans Receivable Balance $7,127,214 $10,961,605 $18,088,819 30+ Day Delinquency Rate 3.15% 5.16%

-------------------------------- (1) The securitized amounts provide a reconciliation between reported and managed financial disclosures in accordance with the Securities and Exchange Commission Regulation G. The securitized amounts are not the equivalent of loan balances transferred to the Company's securitization trust because they exclude the senior seller's interest in such loans. The senior seller's interest, which is an undivided interest in the loans transferred to the securitization trust, is included in reported loans receivable. The securitized amounts include the seller's interest subordinated component, which represents the Company's retained interest in outstanding accrued interest and fees that are allocated to securityholders' interests and is reported in due from securitizations on the Company's balance sheet.

Providian Financial Corporation Allowance for Credit Losses

Three months ended March 31, ---------------------------------------------------------------------- (dollars in thousands) 2005 2004 ----------------------------------------------------------------------

Balance at beginning of period $ 599,703 $ 625,886 Provision for credit losses 60,845 88,852 Credit losses (98,142) (188,818) Recoveries 17,702 42,890 Credit losses on loans held for securitization or sale (1) (141,100) - ---------------------------------------------------------------------- Balance at end of period $ 439,008 $ 568,810 ======================================================================

(1) The decrease in the allowance for credit losses of $141.1 million represents the allowance for credit losses that, together with the outstanding balances of the higher-risk loans receivable, was transferred to loans held for securitization or sale as part of the adjustment to the fair value.

Providian Financial Corporation and Subsidiaries Consolidated Statements of Financial Condition

March 31, December 31, ---------------------------------------------------------------------- (dollars in thousands, except per share data) 2005 2004 ---------------------------------------------------------------------- (unaudited) Assets Cash and cash equivalents $ 217,013 $ 272,397 Federal funds sold and securities purchased under resale agreements 397,352 440,351 Investment securities: Available-for-sale, at market value (amortized cost of $4,151,577 at March 31, 2005 and $4,083,634 at December 31, 2004) 4,138,418 4,072,695

Loans receivable 7,127,214 7,522,401 Less allowance for credit losses (439,008) (599,703) ---------------------------------------------------------------------- Loans receivable, net 6,688,206 6,922,698

Due from securitizations 2,245,685 2,266,314 Deferred taxes - 30,185 Premises and equipment, net 49,389 52,640 Interest receivable 62,814 57,807 Other assets 247,855 229,452 ---------------------------------------------------------------------- Total assets $14,046,732 $14,344,539 ======================================================================

Liabilities Deposits: Non-interest bearing $ 53,681 $ 53,398 Interest bearing 9,014,502 9,417,606 ---------------------------------------------------------------------- 9,068,183 9,471,004

Short-term borrowings 342,569 342,080 Long-term borrowings 1,124,886 1,119,278 Accrued expenses and other liabilities 667,129 702,648 ---------------------------------------------------------------------- Total liabilities 11,202,767 11,635,010

Shareholders' Equity Common stock, par value $0.01 per share (authorized: 800,000,000 shares; issued: March 31, 2005 -- 294,936,562 shares; December 31, 2004 -- 293,980,878 shares) 2,949 2,940 Retained earnings 2,876,802 2,735,223 Cumulative other comprehensive income (8,220) (6,833) Common stock held in treasury -- at cost (March 31, 2005 -- 815,077 shares; December 31, 2004 -- 479,464 shares) (27,566) (21,801) Total shareholders' equity 2,843,965 2,709,529 ---------------------------------------------------------------------- Total liabilities and shareholders' equity $14,046,732 $14,344,539 ======================================================================

Providian Financial Corporation and Subsidiaries Consolidated Statements of Income Three months ended March 31, ---------------------------------------------------------------------- (dollars in thousands, except per share data) (unaudited) 2005 2004 ----------------------------------------------------------------------

Interest Income Loans $203,403 $217,900 Federal funds sold and securities purchased under resale agreements 2,798 6,279 Other 40,500 21,212 ---------------------------------------------------------------------- Total interest income 246,701 245,391

Interest Expense Deposits 95,889 114,896 Borrowings 16,480 18,816 ---------------------------------------------------------------------- Total interest expense 112,369 133,712 ---------------------------------------------------------------------- Net interest income 134,332 111,679

Provision for credit losses 60,845 88,852 ----------------------------------------------------------------------

Net interest income after provision for credit losses 73,487 22,827

Non-Interest Income Servicing and securitization 225,586 226,091 Credit product fee income 124,906 149,144 Other 40,320 11,544 ---------------------------------------------------------------------- 390,812 386,779

Non-Interest Expense Salaries and employee benefits 64,023 81,480 Solicitation and advertising 63,437 52,571 Occupancy, furniture, and equipment 17,499 26,213 Data processing and communication 29,938 27,048 Other 86,091 78,694 ---------------------------------------------------------------------- 260,988 266,006

Income before income taxes 203,311 143,600 Income tax expense 70,290 49,933 ---------------------------------------------------------------------- Net Income $133,021 $ 93,667 ======================================================================

---------------------------------------------------------------------- Earnings per common share -- basic $ 0.46 $ 0.33 ======================================================================

---------------------------------------------------------------------- Earnings per common share -- assuming dilution $ 0.40 $ 0.30 ======================================================================

Weighted average common shares outstanding -- basic (000) 290,864 288,085 ======================================================================

Weighted average common shares outstanding -- assuming dilution (000) 340,436 317,622 ======================================================================

Providian National Bank Total Risk-Based Capital Ratios as of March 31, 2005 (1)

Providian National Bank ---------------

Call Report Basis (2) 25.25% Applying Subprime Guidance (3) 22.22%

(1) Total risk-based capital (Tier 1 + Tier 2) divided by total risk-based assets.

(2) Total risk-based capital ratio as shown on the March 31, 2005 Call Report.

(3) Total risk-based capital ratio after applying the increased risk weightings under the Expanded Guidance for Subprime Lending Programs ("Subprime Guidance").

Providian Financial Corporation and Subsidiaries Reconciliation of Non-Interest Expense

Three months ended March 31, ---------------------------------------------------------------------- (dollars in thousands) (unaudited) 2005 2004 ----------------------------------------------------------------------

Non-Interest Expense Salaries and employee benefits $ 64,023 $ 81,480 Solicitation and advertising 63,437 52,571 Occupancy, furniture, and equipment 17,499 26,213 Data processing and communication 29,938 27,048 Other 86,091 78,694 ---------------------------------------------------------------------- Total non-interest expense 260,988 266,006 Less: solicitation and advertising (63,437) (52,571) ---------------------------------------------------------------------- Total non-interest expense, excluding solicitation and advertising $197,551 $213,435 ======================================================================

Providian Financial Corporation Financial & Statistical Summary Reported Financial Measures (unaudited)

--------------------------------------- 2003 2003 2003 2003 (in millions, except per Q4 Q3 Q2 Q1 share and employee data) Restated Restated Restated Restated ---------------------------------------------------------------------- Reported Earnings: Net Interest Income $ 80.7 $ 77.7 $ 124.3 $ 176.3 Non-Interest Income 429.9 461.1 401.1 433.8 --------------------------------------- Total Net Revenue 510.6 538.8 525.4 610.1 Provision for Credit Losses 129.8 98.7 132.0 261.8 Non-Interest Expense 261.5 286.6 324.6 328.3 --------------------------------------- Income Before Income Taxes 119.3 153.5 68.8 20.0 Income Tax Expense 47.0 60.4 27.1 7.7 --------------------------------------- Net Income $ 72.3 $ 93.1 $ 41.7 $ 12.3 ---------------------------------------------------------------------- Reported Financial Data: Quarter: Net Credit Losses (1) $ 148 $ 156 $ 237 $ 296 Provision for Credit Losses $ 130 $ 99 $ 132 $ 262 Quarter End: Total Loans $ 6,281 $ 5,994 $ 6,417 $ 7,147 Total Assets $ 14,246 $ 15,300 $ 16,164 $ 16,562 Total Equity $ 2,296 $ 2,222 $ 2,139 $ 2,090 Quarter Average: Total Loans $ 5,934 $ 5,865 $ 6,684 $ 7,500 Earning Assets $ 12,314 $ 12,808 $ 13,979 $ 13,525 Total Assets $ 14,782 $ 15,702 $ 16,416 $ 16,469 Total Equity $ 2,270 $ 2,161 $ 2,117 $ 2,038 ---------------------------------------------------------------------- Key Reported Statistics: Net Interest Margin on Average Earning Assets (2) 2.62% 2.43% 3.56% 5.21% Net Interest Margin on Average Loans (3) 8.28% 8.85% 10.14% 11.47% Risk Adjusted Margin on Average Loans (4) 27.29% 29.65% 19.95% 18.81% Adjusted Margin on Average Loans (5) 9.53% 10.03% 9.09% 6.35% Non-interest Income Margin (6) 28.98% 31.45% 24.00% 23.13% Return on Average Assets 1.96% 2.37% 1.02% 0.30% Return on Equity 12.75% 17.22% 7.87% 2.41% Allowance as a Percent of Loans 9.96% 10.74% 12.20% 13.69% Net Credit Loss Rate (7) 9.97% 10.65% 14.19% 15.79% 30+ Day Delinquency Rate (8) 6.64% 7.18% 7.64% 8.76% Equity to Assets 16.12% 14.53% 13.23% 12.62% ---------------------------------------------------------------------- Common Share Statistics: Earnings Per Common Share - Basic $ 0.25 $ 0.32 $ 0.15 $ 0.04

Earnings Per Common Share - Assuming Dilution 0.24 0.30 0.14 0.04

Book Value Per Share (Period End) $ 7.92 $ 7.66 $ 7.37 $ 7.21 Total Market Capitalization (Period End) $ 3,381 $ 3,421 $ 2,689 $ 1,901 Shares Outstanding (Period End) 290.4 290.2 290.4 289.8 Weighted Average Shares O/S - Basic 287.7 287.6 286.3 286.2 Weighted Average Shares O/S - Diluted 314.9 314.0 298.0 290.4 Interest on convertible senior notes, net-of-taxes 1.7 1.7 0.7 -

Accounts 10.5 10.8 11.4 11.7 Employees (FTE) 4,502 5,012 5,692 6,083

(1) The net credit losses for the second quarter of 2003 exclude the fair value adjustments on loans held for securitization or sale.

(2) Represents interest income, less interest expense, expressed as a percentage of reported average earning assets.

(3) Represents interest income, less interest expense, expressed as a percentage of reported average loans receivable. Interest expense is allocated to reported average loans receivable based on the ratio of reported average loans receivable to reported average earning assets.

(4) Represents interest income, less interest expense and net credit losses, plus non-interest income, expressed as a percentage of reported average loans receivable. Interest expense is allocated to reported average loans receivable based on the ratio of reported average loans receivable to reported average earning assets.

(5) Represents interest income, less interest expense and net credit losses, plus credit product fee income on reported average loans receivable, expressed as a percentage of reported average loans receivable. Interest expense is allocated to reported average loans receivable based on the ratio of reported average loans receivable to reported average earning assets.

(6) Represents reported non-interest income expressed as a percentage of reported average loans receivable.

(7) Represents principal amounts of reported loans receivable that have been charged off, less recoveries, expressed as a percentage of reported average loans receivable during the period; fraud losses are not included.

(8) Represents reported loans receivable that are 30 days or more past due at period end, expressed as a percentage of reported loans receivable at period end.

Providian Financial Corporation Financial & Statistical Summary Managed Financial Measures (unaudited)

----------------------------------------- 2003 2003 2003 2003 Q4 Q3 Q2 Q1 (dollars in millions) Restated Restated Restated Restated ---------------------------------------------------------------------- Managed Net Revenue: Net Interest Income $ 574.2 $ 590.7 $ 649.5 $ 705.5 Non-Interest Income 385.6 398.9 398.5 443.0 -------------------------------------------------------------------- Total Net Revenue (1) $ 959.8 $ 989.6 $ 1,048.0 $ 1,148.5 ==================================================================== Managed Financial Data: Quarter: Net Credit Losses $ 597.1 $ 607.0 $ 759.8 $ 834.5 Net Change in Reported Allowance for Credit Losses (2) (18.1) (57.5) (105.1) (34.2) -------------------------------------------------------------------- Adjusted Credit Losses $ 579.0 $ 549.5 $ 654.7 $ 800.3 ====================================================================

Quarter End: Total Loans (3) $ 16,934 $ 16,945 $ 17,798 $ 18,470 Securitized Loans (4) $ 10,653 $ 10,951 $ 11,381 $ 11,323 Total Assets (5) $ 23,169 $ 23,749 $ 25,089 $ 25,487 Total Equity $ 2,296 $ 2,222 $ 2,139 $ 2,090 Quarter Average: Total Loans $ 16,667 $ 16,891 $ 18,045 $ 18,952 Securitized Loans (4) $ 10,733 $ 11,026 $ 11,361 $ 11,452 Earning Assets $ 23,047 $ 23,834 $ 25,340 $ 24,977 Total Assets $ 23,312 $ 24,424 $ 25,341 $ 25,445 Total Equity $ 2,270 $ 2,161 $ 2,117 $ 2,038 ---------------------------------------------------------------------- Key Managed Statistics:

Net Interest Margin on Average Earning Assets (6) 9.97% 9.91% 10.25% 11.30% Net Interest Margin on Average Loans (7) 14.43% 14.78% 15.09% 15.40% Risk Adjusted Margin on Average Loans (8) 9.35% 9.86% 7.08% 7.14% Adjusted Margin on Average Loans (9) 7.33% 7.65% 5.18% 5.39% Non-interest Income Margin (10) 9.25% 9.45% 8.83% 9.35% Return on Average Assets 1.24% 1.52% 0.66% 0.19% Net Credit Loss Rate (11) 14.33% 14.37% 16.84% 17.61% 30+ Day Delinquency Rate (12) 9.29% 9.68% 9.72% 10.31% Equity to Managed Assets 9.91% 9.36% 8.52% 8.20%

(1) Represents the interest income and non-interest income earned from managed loans receivable and investments less interest expense, including the interest costs payable to securitization investors.

(2) The net change in the reported allowance for credit losses excludes the allowance transferred to loans held for securitization or sale.

(3) Represents all loans receivable from customer accounts that are managed by the Company, including the loans receivable reported on the Company's statement of financial condition and the loans receivable removed or reclassified from the Company's statement of financial condition through the Company's securitizations. Loans receivable amounts exclude estimated uncollectible interest and fees.

(4) Effective December 2002, the Company adopted the federal banking agencies' accrued interest receivable, or AIR, guidance, resulting in a reclassification of a portion of accrued interest receivable from reported loans receivable to due from securitizations during 2003. Securitized loans for 2003 include the AIR reclassification.

(5) Managed assets represent total assets reported on the Company's statement of financial condition, plus the loans receivable removed or reclassified from loans receivable on its statement of financial condition through securitizations, less the retained interests from securitizations reported on its statement of financial condition.

(6) Represents interest income, less interest expense, expressed as a percentage of managed average earning assets.

(7) Represents interest income, less interest expense, expressed as a percentage of managed average loans receivable. Interest expense is allocated to managed average loans receivable based on the ratio of managed average loans receivable to managed average earning assets.

(8) Represents interest income, less interest expense and net credit losses, plus non-interest income, expressed as a percentage of managed average loans receivable. Interest expense is allocated to managed average loans receivable based on the ratio of managed average loans receivable to managed average earning assets.

(9) Represents interest income, less interest expense and net credit losses, plus credit product fee income on managed average loans receivable, expressed as a percentage of managed average loans receivable. Interest expense is allocated to managed average loans receivable based on the ratio of managed average loans receivable to managed average earning assets.

(10) Represents managed non-interest income expressed as a percentage of managed average loans receivable. Managed non-interest income excludes the interest income reclassification related to certain retained beneficial interests.

(11) Represents principal amounts of managed loans receivable that have been charged off, less recoveries, expressed as a percentage of managed average loans receivable during the period; fraud losses are not included.

(12) Represents managed loans receivable that are 30 days or more past due at period end, expressed as a percentage of managed loans receivable at period end.

Providian Financial Corporation Financial & Statistical Summary Reconciliation of Reported and Managed Financial Measures

-------------------------------------------------------- Restated Reported Secur- Managed Reported Secur- Managed (dollars in 2005 itization 2005 2004 itization 2004 millions) QTR 01 Adjustment QTR 01 QTR 04 Adjustment QTR 04 ---------------------------------------------------------------------- Earnings: Interest Income Loans $ 203.4 $ 496.9 $ 700.3 $ 209.3 $ 528.0 $ 737.3 Interest Income Investments 43.3 (14.2) 29.1 43.1 (15.8) 27.3 Interest Expense 112.4 75.2 187.6 119.6 64.9 184.5 -------------------------------------------------------- Net Interest Income $ 134.3 $ 407.5 $ 541.8 $ 132.8 $ 447.3 $ 580.1 Non-Interest Income 390.8 (109.1) 281.7 396.0 (120.6) 275.4 -------------------------------------------------------- Total Net Revenue $ 525.1 $ 298.4 $ 823.5 $ 528.8 $ 326.7 $ 855.5 --------------------------------------------------------

-------------- Financial Data: Quarter: Net Interest Income Loans $ 136.4 $ 552.6 $ 142.2 $ 595.8 Net Interest Income Investments (2.1) (10.8) (9.4) (15.7) -------- ---------------- -------- Net Interest Income $ 134.3 $ 541.8 $ 132.8 $ 580.1 Net Credit Losses $ 80 $ 299 $ 379 $ 119 $ 327 $ 446

Quarter End: Total Loans $ 7,127 $10,962 $18,089 $ 7,522 $11,014 $18,536 Total Assets $14,047 $ 9,293 $23,340 $14,345 $ 9,292 $23,637

Quarter Average: Total Loans (1) $ 7,164 $10,815 $17,979 $ 6,936 $10,928 $17,864 Earning Assets (1) $12,027 $10,815 $22,842 $12,372 $10,928 $23,300 Total Assets $14,105 $ 9,139 $23,244 $14,340 $ 9,135 $23,475 ----------------------------------------------------------------------

-------------------------------------------------------- Restated Restated Reported Secur- Managed Reported Secur- Managed (dollars in 2004 itization 2004 2004 itization 2004 millions) QTR 03 Adjustment QTR 03 QTR 02 Adjustment QTR 02 ---------------------------------------------------------------------- Earnings: Interest Income Loans $ 223.7 $ 497.5 $ 721.2 $ 209.6 $ 493.7 $ 703.3 Interest Income Invest- ments 35.0 (15.2) 19.8 28.8 (10.9) 17.9 Interest Expense 119.4 47.6 167.0 123.0 40.9 163.9 --------------------------------------------------------- Net Interest Income $ 139.3 $ 434.7 $ 574.0 $ 115.4 $ 441.9 $ 557.3 Non- Interest Income 421.2 (109.2) 312.0 401.3 (66.9) 334.4 --------------------------------------------------------- Total Net Revenue $ 560.5 $ 325.5 $ 886.0 $ 516.7 $ 375.0 $ 891.7 ---------------------------------------------------------

------------- Financial Data: Quarter: Net Interest Income Loans $ 149.3 $ 588.1 $ 138.8 $ 576.3 Net Interest Income Invest- ments (10.0) (14.1) (23.4) (19.0) ---------- ------------------ -------- Net Interest Income $ 139.3 $ 574.0 $ 115.4 $ 557.3 Net Credit Losses $ 128 $ 326 $ 454 $ 150 $ 375 $ 525

Quarter End: Total Loans $ 7,307 $10,594 $17,901 $ 6,884 $10,361 $17,245 Total Assets $13,836 $ 8,849 $22,685 $13,535 $ 8,661 $22,196

Quarter Average: Total Loans (1) $ 7,340 $10,129 $17,469 $ 6,611 $10,167 $16,778 Earning Assets (1)$11,782 $10,129 $21,911 $11,479 $10,167 $21,646 Total Assets $13,622 $8,455 $22,077 $13,432 $ 8,600 $22,032 ----------------------------------------------------------------------

------------------------------------ Restated Reported Managed 2004 Securitization 2004 (dollars in millions) QTR 01 Adjustment QTR 01 ---------------------------------------------------------------------- Earnings: Interest Income Loans $ 217.9 $ 505.1 $ 723.0 Interest Income Investments 27.5 (8.8) 18.7 Interest Expense 133.7 42.0 175.7 ------------------------------------ Net Interest Income $ 111.7 $ 454.3 $ 566.0 Non-Interest Income 386.8 (20.7) 366.1 ------------------------------------ Total Net Revenue $ 498.5 $ 433.6 $ 932.1 ------------------------------------

---------------------------------- Financial Data: Quarter: Net Interest Income Loans $ 144.4 $ 589.6 Net Interest Income Investments (32.7) (23.6) ----------- ---------- Net Interest Income $ 111.7 $ 566.0 Net Credit Losses $ 146 $ 434 $ 580 Quarter End: Total Loans $ 6,191 $ 10,485 $ 16,676 Total Assets $ 13,450 $ 8,780 $ 22,230 Quarter Average: Total Loans (1) $ 6,473 $ 10,232 $ 16,705 Earning Assets (1) $ 11,778 $ 10,232 $ 22,010 Total Assets $ 13,750 $ 8,648 $ 22,398 ----------------------------------------------------------------------

(1) The Q1 2005 average balances exclude loans held for securitization or sale in the amount of $183 million.

Providian Financial Corporation Financial & Statistical Summary Reconciliation of Reported and Managed Financial Measures

-------------------------------------------------------- Restated Restated (dollars in Reported Secur- Managed Reported Secur- Managed 2003 itization 2003 2003 itization 2003 millions) QTR 04 Adjustment QTR 04 QTR 03 Adjustment QTR 03 ---------------------------------------------------------------------- Earnings: Interest Income Loans $ 191.9 $ 542.7 $ 734.6 $ 200.8 $ 562.3 $ 763.1 Interest Income Investments 32.0 (8.2) 23.8 31.8 (8.2) 23.6 Interest Expense 143.2 41.0 184.2 154.9 41.1 196.0 -------------------------------------------------------- Net Interest Income $ 80.7 $ 493.5 $ 574.2 $ 77.7 $ 513.0 $ 590.7 Non-Interest Income 429.9 (44.3) 385.6 461.1 (62.2) 398.9 -------------------------------------------------------- Total Net Revenue $ 510.6 $ 449.2 $ 959.8 $ 538.8 $ 450.8 $ 989.6 --------------------------------------------------------

-------------- Financial Data: Quarter: Net Interest Income Loans $ 122.9 $ 601.4 $ 129.9 $ 624.2 Net Interest Income Investments (42.2) (27.2) (52.2) (33.5) -------- ---------------- -------- Net Interest Income $ 80.7 $ 574.2 $ 77.7 $ 590.7 Net Credit Losses $ 148 $ 449 $ 597 $ 156 $ 451 $ 607

Quarter End: Total Loans $ 6,281 $10,653 $16,934 $ 5,994 $10,951 $16,945 Total Assets $14,246 $ 8,923 $23,169 $15,300 $ 8,449 $23,749

Quarter Average: Total Loans $ 5,934 $10,733 $16,667 $ 5,865 $11,026 $16,891 Earning Assets $12,314 $10,733 $23,047 $12,808 $11,026 $23,834 Total Assets $14,782 $ 8,530 $23,312 $15,702 $ 8,722 $24,424 ----------------------------------------------------------------------

------------------------------------------------------ Restated Restated Reported Secur- Managed Reported Secur- Managed 2003 itization 2003 2003 itization 2003 (dollars in QTR 02 Adjustment QTR 02 QTR 01 Adjustment QTR 01 millions) ---------------------------------------------------------------------- Earnings: Interest Income Loans $ 247.7 $ 581.9 $ 829.6 $ 310.3 $ 586.0 $ 896.3 Interest Income Investments 40.5 (11.3) 29.2 37.8 (8.9) 28.9 Interest Expense 163.9 45.4 209.3 171.8 47.9 219.7 ------------------------------------------------------ Net Interest Income $ 124.3 $ 525.2 $ 649.5 $ 176.3 $ 529.2 $ 705.5 Non-Interest Income 401.1 (2.6) 398.5 433.8 9.2 443.0 ------------------------------------------------------ Total Net Revenue $ 525.4 $ 522.6 $1,048.0 $ 610.1 $ 538.4 $1,148.5 ------------------------------------------------------

---------------- Financial Data: Quarter: Net Interest Income Loans $ 169.3 $ 680.6 $ 215.0 $ 729.6 Net Interest Income Investments (45.0) (31.1) (38.7) (24.1) -------- ----------------- --------- Net Interest Income $ 124.3 $ 649.5 $ 176.3 $ 705.5 Net Credit Losses $ 237 $ 523 $ 760 $ 296 $ 539 $ 835 Quarter End: Total Loans $ 6,417 $11,381 $ 17,798 $ 7,147 $11,323 $ 18,470 Total Assets $16,164 $ 8,925 $ 25,089 $16,562 $ 8,925 $ 25,487 Quarter Average: Total Loans $ 6,684 $11,361 $ 18,045 $ 7,500 $11,452 $ 18,952 Earning Assets $13,979 $11,361 $ 25,340 $13,525 $11,452 $ 24,977 Total Assets $16,416 $ 8,925 $ 25,341 $16,469 $ 8,976 $ 25,445 ----------------------------------------------------------------------

Non-GAAP Managed Financial Information ----------------------------------------------------------------------

Loans that have been securitized and sold to third party investors are not considered to be our assets under GAAP and therefore are not shown on our balance sheet. However, the interests we retain in the securitized loan pools create financial exposure to the current and expected cash flows of the securitized loans. Although the loans sold are not on our balance sheet, their performance can affect some or all of our retained interests as well as our results of operations and our financial position. In addition, we continue to service these loans.

Because of this continued exposure and involvement, we use managed financial information to evaluate our historical performance, assess our current condition, and plan our future operations. We believe that managed financial information supplements our GAAP information and is helpful to the reader's understanding of our consolidated financial condition and results of operations. "Reported" financial information refers to GAAP financial information. "Managed" financial information is derived by adjusting the reported financial information to add back securitized loan balances and the related finance charge and fee income, credit losses, and net interest costs.

The Company in its April 25, 2005 earnings call will be disclosing certain projected financial measures relating to expected performance on a managed basis, such as net credit losses, net interest income margin, and non- interest income margin. The Company develops such projections on a managed basis using managed financial information and does not in the normal course derive comparable GAAP projections. Developing such comparable GAAP projections would be unreasonably burdensome and in the opinion of management such comparable GAAP projections would not provide to the users of the financial information a significant benefit in understanding the Company's expected future performance.

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CONTACT: Providian Financial Corporation Jack Carsky, 415-278-4977 (Investors) Alan Elias, 415-278-4189 (Media)

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: BANKING CONSUMER/HOUSEHOLD EARNINGS SOURCE: Providian Financial Corporation

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