UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549


                                    FORM 10-Q

(Mark One)

[X]  Quarterly report PURSUANT TO Section 13 or 15(d) of the Securities Exchange
     Act of 1934
     For the quarterly period ended June 30, 1999

                                                           OR

[ ]  Transition  report  PURSUANT  TO  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934
     For the transition period from _________ to _________


                                     1-12897
                            (Commission File Number)

                         PROVIDIAN FINANCIAL CORPORATION
                         -------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


           Delaware                                              94-2933952
-------------------------------                             --------------------
(State or other Jurisdiction of                             (I.R.S.Employer
Incorporation or Organization)                              Identification  No.)


               201 Mission Street, San Francisco, California 94105
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)


                                 (415) 543-0404
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

                                 Not Applicable
                                 --------------
     (Former name,  former address and former fiscal year, if changed since last
     report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X     No
     ---        ---

     As of July 30,  1999,  there were  141,798,475  shares of the  registrant's
Common Stock, par value $0.01 per share, outstanding.

<PAGE>

                         PROVIDIAN FINANCIAL CORPORATION
                                    FORM 10-Q

                                      INDEX

                                  June 30, 1999


PART I.   FINANCIAL INFORMATION                                             Page
                                                                            ----

          Item  1.  Financial Statements (unaudited):
                       Condensed Consolidated Statements of Financial
                         Condition.............................................3
                       Condensed Consolidated Statements of Income.............4
                       Condensed Consolidated Statements of Changes in
                         Shareholders' Equity..................................5
                       Condensed Consolidated Statements of Cash Flows.........6
                       Notes to Condensed Consolidated Financial
                         Statements............................................7

          Item 2.   Management's Discussion and Analysis of Financial
                       Condition and Results of Operations....................11

PART II.  OTHER INFORMATION

          Item 1. Legal Proceedings...........................................30

          Item 4. Other Information...........................................31

          Item 6. Exhibits and Reports on Form 8-K............................32

Signatures....................................................................33


<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements.

<TABLE>

Condensed Consolidated Statements of Financial Condition (Unaudited)
Providian Financial Corporation and Subsidiaries
<CAPTION>
                                                                                   June 30           December 31
(Dollars in thousands, except share data)                                            1999               1998
                                                                                 -----------         -----------
<S>                                                                              <C>                 <C>
Assets:
Cash and cash equivalents                                                        $   207,754         $   176,348
Federal funds sold                                                                   769,125             297,869
Investment securities:
  Available-for-sale                                                                 167,536             114,858
  Held-to-maturity                                                                   181,171             318,817
Loans receivable, less allowance for credit losses of $675,224 at
   June 30, 1999 and $451,245 at December 31, 1998                                 7,468,981           5,282,014
Premises and equipment, net                                                          109,292              82,858
Interest receivable                                                                   72,063              51,801
Due from securitizations                                                             365,611             454,374
Deferred taxes                                                                       415,974             306,234
Other assets                                                                         192,089             146,042
                                                                                 -----------         -----------

        Total assets                                                             $ 9,949,596         $ 7,231,215
                                                                                 ===========         ===========

Liabilities:
Deposits:
   Non-interest bearing                                                          $    49,363         $    48,220
   Interest bearing                                                                5,948,217           4,624,078
                                                                                 -----------         -----------
                                                                                   5,997,580           4,672,298

Short-term borrowings                                                                858,778             472,500
Long-term borrowings                                                               1,029,305             399,757
Deferred fee revenue                                                                 442,328             334,617
Accrued expenses and other liabilities                                               448,910             388,856
                                                                                 -----------         -----------
        Total liabilities                                                          8,776,901           6,268,028

Company obligated mandatorily redeemable capital securities of
  subsidiary trust holding solely junior subordinated deferrable
  interest debentures of the Company (Capital Securities)                            160,000             160,000

Shareholders' Equity:
Common stock, par value $.01 per share (authorized: 800,000,000
  shares; issued and outstanding: June 30, 1999 - 141,784,004 shares;
  December 31, 1998 - 141,732,008 shares)                                                954                 954
Additional paid-in capital                                                               946                   -
Retained earnings                                                                  1,100,325             866,005
Cumulative other comprehensive income                                                   (502)               (320)
Common stock held in treasury - at cost: (June 30, 1999 - 1,335,976
   shares; December 31, 1998 - 1,405,972 shares)                                     (89,028)            (63,452)
                                                                                 ------------        ------------
        Total shareholders' equity                                                 1,012,695             803,187
                                                                                 ------------        ------------
        Total liabilities and shareholders' equity                               $ 9,949,596         $ 7,231,215
                                                                                 ============        ============

See notes to condensed consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>

Condensed Consolidated Statements of Income (Unaudited)
Providian Financial Corporation and Subsidiaries
<CAPTION>


                                                                Three Months Ended               Six Months Ended
                                                                     June 30                         June 30
                                                              ----------------------          ----------------------
(Dollars in thousands, except per share data)                   1999          1998               1999        1998
                                                              ---------    ---------          ---------    ---------
<S>                                                           <C>          <C>                <C>          <C>
Interest income:
   Loans                                                      $ 358,449    $ 185,213          $ 637,574    $ 355,283
   Investment securities                                         14,480        9,007             26,971       15,514
                                                              ---------    ---------          ---------    ---------
   Total interest income                                        372,929      194,220            664,545      370,797

Interest expense:
   Deposits                                                      73,790       48,970            138,229       95,123
   Borrowings                                                    26,480       12,561             42,542       21,164
                                                              ---------    ---------          ---------    ---------
   Total interest expense                                       100,270       61,531            180,771      116,287

          Net interest income                                   272,659      132,689            483,774      254,510

Provision for credit losses                                     255,222      117,851            437,295      175,507
                                                              ---------    ----------         ---------    ---------

          Net interest income after provision
          for credit losses                                      17,437       14,838             46,479       79,003

Non-interest income:
   Servicing and securitizations                                148,763      156,677            279,974      270,793
   Credit product fee income                                    414,819      120,847            756,629      217,255
   Other                                                          7,876          485             12,111          664
                                                              ---------    ---------          ---------    ---------
                                                                571,458      278,009          1,048,714      488,712
Non-interest expense:
   Salaries and employee benefits                               121,784       60,911            217,771      120,645
   Solicitation                                                 102,231       46,663            201,678       88,275
   Occupancy, furniture and equipment                            18,877       11,088             34,181       22,354
   Data processing and communication                             29,852       22,080             54,614       37,834
   Other                                                        105,096       48,183            186,702      101,870
                                                              ---------    ---------          ---------    ---------
                                                                377,840      188,925            694,946      370,978
                                                              ---------    ---------          ---------    ---------

          Income before income taxes                            211,055      103,922            400,247      196,737

Income tax expense                                               84,569       41,059            160,215       77,766
                                                              ---------    ---------          ---------    ---------
          Net Income                                          $ 126,486     $ 62,863          $ 240,032    $ 118,971
                                                              =========    =========          =========    =========

Earnings per share - basic                                    $    0.89     $   0.44          $    1.70    $    0.84
                                                              =========    =========          =========    =========
Earnings per share - assuming dilution                        $    0.87     $   0.43          $    1.65    $    0.82
                                                              =========    =========          =========    =========

Cash dividends paid per share                                 $    0.05     $   0.03          $    0.10    $    0.06
                                                              =========    =========          =========    =========

Weighted average common shares outstanding - basic (000)        141,483      142,047            141,298      142,152
                                                              ==========   =========          =========    =========
Weighted average shares and assumed conversions (000)           145,546      145,169            145,623      144,992
                                                              ==========   =========          =========    =========

See notes to condensed consolidated financial statements.

</TABLE>

<PAGE>

<TABLE>

Condensed Consolidated Statements of Changes in Shareholders' Equity  (Unaudited)
Providian Financial Corporation and Subsidiaries
<CAPTION>

                                                                                  Cumulative      Common
                                                          Additional              Other           stock
                                                 Common   Paid-In     Retained    Comprehensive   Held in
(Dollars in thousands, except per share data)    Stock    Capital     Earnings    Income          Treasury        Total
                                                 ------   ----------  ---------   -------------   ---------    ----------
<S>                                              <C>      <C>         <C>         <C>             <C>          <C>

Balance at December 31, 1997                     $ 954    $ 4,217     $599,856    $      -        $ (9,913)    $  595,114
Net Income                                                             118,971                                    118,971
Cash dividend:
    Common - $0.06 per share                                            (9,521)                                    (9,521)
Purchase of 535,800 common
      shares for treasury                                   3,730                                  (24,436)       (20,706)
Exercise of stock options and other awards                 (5,856)                                   8,094          2,238
Issuance of restricted and unrestricted
      stock less forfeited shares                           1,429                                    3,405          4,834
Deferred compensation related to
      grant of restricted and unrestricted
      stock less amortization of $1,842                    (3,018)                                                 (3,018)
Put warrant premium                                         1,325                                                   1,325
Net tax effect from exercise of stock options
    and issuance of restricted stock                        2,863                                                   2,863
                                                 ------   -------     ----------  -------------   --------     ----------
Balance at June 30, 1998                         $ 954    $ 4,690     $ 709,306   $      -        $(22,850)    $  692,100
                                                 ======   =======     ==========  =============   ========     ==========

Balance at December 31, 1998                     $ 954    $     -     $ 866,005   $   (320)       $(63,452)    $  803,187
Comprehensive income:
    Net Income                                                          240,032                                   240,032
    Other comprehensive income, net of
      income tax:
         Unrealized loss on securities net of
              income taxes of $123                                                    (191)                          (191)
         Foreign currency translation adjustments
              net of income taxes of ($6)                                                9                              9
                                                                                                               ----------
    Other comprehensive income                                                                                       (182)
                                                                                                               ----------
Comprehensive income                                                                                              239,850
Cash dividend:
    Common - $0.10 per share                                            (14,178)                                  (14,178)
Purchase of 933,459 common
      shares for treasury                                  25,923                                  (97,120)       (71,197)
Exercise of stock options and other awards                (51,388)        8,466                     62,515         19,593
Issuance of restricted and unrestricted
      stock less forfeited shares                            (422)                                   9,029          8,607
Deferred compensation related to
      grant of restricted and unrestricted
      stock less amortization of $3,708                    (4,896)                                                 (4,896)
Net tax effect from exercise of stock options
    and issuance of restricted stock                       31,729                                                  31,729
                                                 ======   =======     ==========  =============   ========     ==========
Balance at June 30, 1999                         $ 954    $   946     $1,100,325  $   (502)       $(89,028)    $1,012,695
                                                 ======   =======     ==========  =============   ========     ==========

See notes to condensed consolidated financial statements.

</TABLE>

<PAGE>

<TABLE>

Condensed Consolidated Statements of Cash Flows (Unaudited)
Providian Financial Corporation and Subsidiaries
<CAPTION>
                                                                                    Six Months Ended
                                                                                        June 30
                                                                                ------------------------
(Dollars in thousands)                                                             1999          1998
                                                                                ----------    ----------
<S>                                                                             <C>           <C>
Operating Activities:
    Net Income                                                                  $  240,032     $ 118,971
    Adjustments to reconcile net income to net cash provided by operating
    activities:
     Provision for credit losses                                                   437,295       175,507
     Depreciation and amortization of premises and equipment                        14,548         7,302
     Amortization of net loan acquisition costs                                     26,604        19,741
     Amortization of deferred compensation
       related to restricted and unrestricted stock                                  3,708         1,816
     Amortization of deferred fee revenue                                         (254,104)      (60,515)
     Increase in deferred income tax benefit                                      (109,623)      (50,108)
     Increase in deferred fee revenue                                              398,806       147,042
     Increase in interest receivable                                               (20,262)       (6,387)
     Net increase in other assets                                                  (72,578)      (29,610)
     Net increase in accrued expenses and other liabilities                         54,794        66,508
                                                                                ----------    -----------
                     Net Cash Provided by Operating Activities                     719,220       390,267

Investing Activities:
     Net decrease (increase) in money market instrument investments                 74,894      (299,480)
     Net cash used for loan originations and principal
       collections on loans receivable                                          (3,066,363)     (385,947)
     Net increase in securitized loans                                             569,163     1,049,911
     Portfolio acquisitions                                                       (127,119)   (1,922,265)
     Decrease in due from securitizations                                           88,763       204,900
     Purchases of investment securities                                            (76,042)      (40,284)
     Proceeds from maturities of  investment securities                             85,802            75
     Increase in federal funds sold                                               (471,256)      (25,510)
     Net purchases of premises and equipment                                       (40,982)      (18,076)
                                                                                -----------   -----------
                     Net Cash Used by Investing Activities                      (2,963,140)   (1,436,676)

Financing Activities:
     Net increase in deposits                                                    1,325,282       518,384
     Proceeds from issuance of term federal funds                                1,258,778       450,000
     Repayment of term federal funds                                              (872,500)     (180,000)
     Decrease in notes payable to banks                                                  -       (82,000)
     Increase in long-term borrowings                                              629,548       399,717
     Purchase of treasury stock                                                    (71,197)      (20,706)
     Put warrant premium                                                                 -         1,325
     Dividends paid                                                                (14,178)       (9,521)
     Proceeds from exercise of stock options                                        19,593         2,238
                                                                                -----------   -----------
                     Net Cash Provided by Financing Activities                   2,275,326     1,079,437
                                                                                -----------   -----------

Net Decrease in Cash and Cash Equivalents                                           31,406        33,028
Cash and cash equivalents at beginning of period                                   176,348       112,522
                                                                                -----------   -----------
Cash and cash equivalents at end of period                                      $  207,754     $ 145,550
                                                                                ===========   ===========

See notes to condensed consolidated financial statements.
</TABLE>

<PAGE>

PROVIDIAN FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements
June 30, 1999  (Unaudited)

Note 1 - Basis of Presentation
     The condensed  consolidated  financial  statements  include the accounts of
Providian Financial Corporation and its wholly owned subsidiaries  (collectively
referred  to as the  "Company").  The  Company's  subsidiaries  offer a range of
consumer  lending  products,  deposit  products  and  membership  services.  The
principal operating  subsidiaries of the Company are Providian National Bank and
Providian Bank, which are financial institutions principally engaged in consumer
lending  activities.  Providian  Financial  Corporation  also has a  subsidiary,
Providian Bancorp Services,  which provides administrative and customer services
to its consumer lending affiliates.

     The accompanying  unaudited condensed  consolidated financial statements of
the Company have been prepared in accordance with generally accepted  accounting
principles for interim  financial  information and with the instructions to Form
10-Q and Article 10 of Regulation S-X.  Accordingly,  they do not include all of
the  information  and  footnotes  required  by  generally  accepted   accounting
principles for complete  consolidated  financial  statements.  In the opinion of
management,  all  adjustments  considered  necessary to a fair  statement of the
results for the interim period presented have been included.  The preparation of
financial statements in conformity with generally accepted accounting principles
requires  management to make estimates and  assumptions  that affect the amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could differ from those estimates. Operating results for the three and six month
periods  ended June 30, 1999 are not  necessarily  indicative of the results for
the  year  ended  December  31,  1999.  The  notes to the  financial  statements
contained  in the  Company's  Annual  Report  on Form  10-K for the  year  ended
December  31,  1998  should  be  read in  conjunction  with  these  consolidated
financial  statements.  All significant  intercompany  balances and transactions
have been  eliminated.  Certain prior period amounts have been  reclassified  to
conform to the 1999 presentation.

Note 2 - Earnings Per Share
     The  following  table  sets  forth  the  computation  of both the basic and
assumed conversion methods of earnings per share.

<TABLE>
<CAPTION>
                                                             Three Months Ended June 30      Six Months Ended June 30
    (In thousands, except per share data)                       1999            1998            1999           1998
                                                             --------------------------      -------------------------
<S>                                                          <C>             <C>             <C>            <C>
    Income available to common stockholders                   $ 126,486        $ 62,863       $ 240,032      $ 118,971
                                                             ==========      ==========      ==========     ==========

    Weighted average shares outstanding--basic                  141,483         142,047         141,298        142,152
    Effect of dilutive securities
       Restricted stock issued--non vested                          508             560             581            533
       Employee stock options                                     3,555           2,562           3,744          2,307
                                                             ----------      ----------      ----------     ----------
    Dilutive potential common shares                              4,063           3,122           4,325          2,840
                                                             ----------      ----------      ----------     ----------
    Adjusted weighted average shares and assumed
      conversions                                               145,546         145,169         145,623        144,992
                                                             ==========      ==========      ==========     ==========

    Earnings per share--basic                                 $    0.89        $   0.44       $    1.70      $    0.84
                                                             ==========      ==========      ==========     ==========
    Earnings per share--assuming dilution                     $    0.87        $   0.43       $    1.65      $    0.82
                                                             ==========      ==========      ==========     ==========
</TABLE>
<PAGE>

Note 3 - Loans Receivable and Allowance for Credit Losses
     The following is a summary of the Company's loans receivable:
<TABLE>
<CAPTION>
         (Dollars in thousands)                                June 30, 1999      December 31,1998
                                                               -------------      ----------------
<S>                                                            <C>                <C>
         Credit card and line of credit loans                  $   7,244,124         $   5,129,835
         Home loans                                                  914,834               606,657
         Other                                                         6,021                 4,614
                                                               -------------         -------------
                                                                   8,164,979             5,741,106
         Allowance for credit losses                                (675,224)             (451,245)
         Net deferred origination fees                               (20,774)               (7,847)
                                                               --------------        --------------
                                                               $   7,468,981          $  5,282,014
                                                               ==============        ==============
</TABLE>

         The  activity in the  allowance  for credit  losses for the six months
         ended June 30, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
                                                               Six Months Ended June 30
         (Dollars in thousands)                                  1999             1998
                                                              ----------       ----------
<S>                                                           <C>              <C>
         Balance at beginning of period                       $  451,245       $  145,312
         Provision for credit losses                             437,295          175,507
         Reserve acquired                                         14,310          178,959
         Charge-offs                                            (265,788)        (155,915)
         Recoveries                                               38,162           11,926
                                                              ----------       ----------
         Net charge-offs                                        (227,626)        (143,989)
                                                              ----------       ----------
         Balance at end of period                             $  675,224       $  355,789
                                                              ==========       ==========
</TABLE>

Note 4 - Senior and Subordinated Bank Notes
     During  the  first six  months of 1999,  the  Company,  through  one of its
banking  subsidiaries,  issued an  additional  $630 million of senior bank notes
through a program  that was  established  in 1998.  The total notes  outstanding
under this program as of June 30, 1999 was $1 billion.

Note 5 - Shareholders' Equity
     The  Company is party to an  agreement  to  purchase,  on a forward  basis,
shares of its common  stock.  At the  Company's  election,  the agreement may be
settled on a physical basis or, subject to certain conditions, on a net basis in
shares of the  Company's  common stock or in cash. To the extent that the market
price of the  Company's  common  stock on a  settlement  date is higher than the
forward  purchase price, the Company will receive the net  differential.  To the
extent that the market price of the Company's  common stock on a settlement date
is lower than the forward  purchase  price,  the Company will pay an agreed upon
premium amount. As of June 30, 1999, the agreement covered 318,913 shares of the
Company's  common stock at a forward  price of $129.06 per share.  The agreement
has been extended through June 2000, but may be settled earlier.  During the six
months ended June 30, 1999,  settlements  from this forward  purchase  agreement
resulted in the Company  receiving 248,319 shares of its common stock and paying
premium amounts of $1.1 million which were recorded as adjustments to additional
paid in capital.

Note 6 - Comprehensive Income
     The components of accumulated other  comprehensive  income,  net of related
tax, at June 30, 1999 and  December  31, 1998 are as follows:

                                                                    Cumulative
                                      Unrealized     Foreign          other
                                       Loss on       Currency      Comprehensive
                                      Securities     Translation      Income
(Dollars in thousands)                ----------     -----------   -------------

Beginning balance, December 31, 1998     $ (320)        $    -           $ (320)
Current year other comprehensive income    (191)             9             (182)
                                         -------        -------          -------
Ending balance, June 30, 1999            $ (511)        $    9           $ (502)
                                         =======        =======          =======

<PAGE>

Note 7 - Commitments and Contingencies
     The Company is commonly  subject to various  pending and  threatened  legal
actions  arising  from the  conduct of its normal  business  activities.  In the
opinion of the Company,  any  liability  that is likely to arise with respect to
these  actions  will not have a  material  adverse  effect  on the  consolidated
financial condition or results of operations of the Company.

     Since  May 1999,  following  media  coverage  highlighting  certain  of the
Company's sales and collections  practices, a number of lawsuits have been filed
against  the  Company  and,  in some  cases,  against  certain of the  Company's
subsidiaries  by  current  and  former   customers  of  the  Company's   banking
subsidiaries.  An action is also  pending  in which the  plaintiffs  allege,  in
general,  that the Company and certain of its officers made false and misleading
statements in violation of the federal  securities  laws.  In addition,  the San
Francisco  District  Attorney's  office  confirmed  that  it  had  commenced  an
investigation into the Company's sales and collections practices,  including the
marketing of certain  fee-based  products and the posting of customer  payments.
The remedies  available to the District  Attorney's Office include,  but are not
limited to,  damages,  penalties,  fines and injunctive  relief.  The Company is
cooperating fully with the District Attorney's Office in its investigation.  The
investigation and the actions are at a very early stage. An informed  assessment
of the ultimate outcome or potential liability  associated with these matters is
not feasible at this time. Due to the uncertainties of litigation,  there can be
no assurance  that the Company will prevail on all claims;  however,  management
believes  that the Company has  substantive  defenses  and intends to defend the
actions vigorously.

     In response  to  customer  concerns,  the  Company  introduced  an enhanced
customer satisfaction program. Under this program, the Company announced that it
will reverse late fees that customers feel have been wrongly  charged,  allow an
extra two days to  receive  payments  from  customers  before  assessing  a late
charge,  review  all  customer  offers  to insure  that  they are  clear  from a
customer's  perspective,  and  cancel  any  add-on  products,  including  Credit
Protection,  if customers  feel they were misled or are not getting  appropriate
value,  and refund the fee for such products for up to a full year. In addition,
the Company established an 800 customer service line for customers who feel they
have not been  satisfied  through the  Company's  normal  service  centers,  and
engaged an independent third party to examine payment crediting processes.

     In the course of implementing the enhanced customer  satisfaction  program,
the Company  discovered a programming error that had resulted,  over a period of
months,  in the billing of erroneous late fees related to specific weekend days.
These  errors  have been  corrected,  and steps have been  initiated  to provide
refunds to affected  customers.


Note 8 - Stock Ownership Plan
     In May 1999,  the  Company's  Board of Directors  approved  grants of stock
options to certain non-officer  employees under the Company's newly adopted 1999
Non-Officer  Equity  Incentive Plan.  Under the Plan, the non-officer  employees
received options exercisable for varying numbers of the Company's stock based on
their  length  of  employment  or other  factors.  Options  covering  a total of
1,031,650  shares of the Company's  stock were granted in July 1999.  Additional
grants will be made in January 2000 and July 2000 to certain other employees who
complete a minimum of one year of service and satisfy other conditions.

<PAGE>

Note 9 - Segment Information
     The operations of the Company consist of two primary segments:  Credit Card
Loan and Home Loan.  The Credit Card Loan segment  represents  consumer  lending
products,  including unsecured,  secured and partially secured credit cards, and
includes non-credit card unsecured  revolving lines of credit.  Credit Card Loan
customer  relationships  are initiated  primarily  through  direct  marketing or
portfolio acquisitions from other financial institutions.  The Home Loan segment
represents  home equity loans,  home equity lines of credit and other home loans
made to  individuals  targeted  by the  Company's  home loan  product  marketing
programs.  Membership services revenue,  which is received from both Credit Card
Loan and Home Loan  customers,  is included in the  respective  segment  summary
financial information.

     The  Company's  securitized  loans are not  considered  loans  owned by the
Company and therefore are not shown on the statement of financial condition.  It
is, however,  the Company's  practice to analyze its financial  performance on a
managed loan portfolio  basis.  Segment  information  is presented  below on the
Company's managed loan portfolios.

     The following is a summary of the Company's  segment  activity on a managed
loan basis for the six months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
                                            Credit           Home
    (Dollars in thousands)                   Card            Loan           Other           Total
                                         ------------    ------------    ------------    ------------
<S>                                      <C>             <C>             <C>             <C>

    Three Months Ended June 30, 1999
      Revenue                            $    913,855          37,082           6,938    $    957,875
      Profit or loss                     $    233,781           5,612          (6,389)   $    233,004
      Assets                             $ 14,825,101       1,414,834          26,232    $ 16,266,167

    Three Months Ended June 30, 1998
      Revenue                            $    507,895          18,048              --    $    525,943
      Profit or loss                     $    102,462           3,426              --    $    105,888
      Assets                             $ 10,476,474       1,018,498              --    $ 11,494,972

    Six Months Ended June 30, 1999
      Revenue                            $  1,722,201          62,311          10,136    $  1,794,648
      Profit or loss                     $    464,827           1,381         (30,029)   $    436,179
      Assets                             $ 14,825,101       1,414,834          26,232    $ 16,266,167

    Six Months Ended June 30, 1998
      Revenue                            $    929,766          36,184              --    $    965,950
      Profit or loss                     $    195,993           6,810              --    $    202,803
      Assets                             $ 10,476,474       1,018,498              --    $ 11,494,972

</TABLE>

     The impact of securitizations on the Company's  consolidated  statements of
income is to reduce net interest income and the provision for credit losses, and
to increase  non-interest  income.  The  following  is a  reconciliation  of the
Company's segment activity on a managed basis to the consolidated  statements of
income of the Company for the periods ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
                                                Three months Ended June 30       Six months Ended June 30
    (Dollars in thousands)                          1999            1998            1999           1998
                                                --------------------------     --------------------------
<S>                                             <C>             <C>            <C>             <C>

    Total segment profits                       $  233,004      $  105,888     $  436,179      $  202,803
    Corporate and other                            (21,949)         (1,966)       (35,932)         (6,066)
                                                --------------------------     --------------------------
       Income before income taxes               $  211,055      $  103,922     $  400,247      $  196,737
                                                ==========================     ==========================
</TABLE>
<PAGE>

Note 10 - Business Combination
     On February 18, 1999, the Company  acquired the assets of GetSmart.com  and
assumed certain related liabilities.  GetSmart.com is an online referral service
for consumer  borrowers which provides loan  information and lender  connections
through  proprietary search and application  technology.  The purchase price was
$32.1 million,  paid in cash,  plus $1.5 million in transaction  costs,  and the
Company assumed liabilities of $4.4 million.

     The acquisition has been accounted for as a purchase and, accordingly,  the
results of  operations  of  GetSmart.com  have been  included  in the  Company's
consolidated financial statements from the date of acquisition.

<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Introduction
     Providian  Financial  Corporation  (the "Company") is a leading provider of
consumer lending products,  including credit cards,  home loans,  secured credit
cards, and membership services. In addition,  the Company offers various deposit
products.  The  Company  offers  its  products  primarily  through  its  banking
subsidiaries,  Providian  National Bank, a national bank, and Providian  Bank, a
Utah industrial loan corporation.  The Company's products are offered to a broad
spectrum of consumers.  Credit card products  range from gold and platinum cards
with high credit  lines to lower line  classic and secured  cards  designed  for
consumers underserved by traditional financial institutions. The primary factors
affecting the  profitability  of the  Company's  consumer  lending  business are
growth in the number of customer  accounts and  outstanding  loan balances,  net
interest   spread  on  loans,   fee  revenue,   credit  usage,   credit  quality
(delinquencies and credit losses), level of solicitation and marketing expenses,
and account servicing efficiency.

Forward-Looking Information
     Certain  statements  contained  herein include  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,  and are subject
to the "safe  harbor"  created  by those  sections.  Forward-looking  statements
include   expressions  of  "belief,"   "anticipation,"   or   "expectations"  of
management,  statements as to industry trends or future results of operations of
the Company, and other statements which 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,  competition,  delinquencies,  credit  losses,
vendor   relationships,   funding  costs  and  availability,   general  economic
conditions,  government policy and regulations, risks related to growth, product
development,  acquisitions  and operations,  litigation and Year 2000 readiness.
These and other risks and uncertainties are described in detail in the Company's
1998  Annual  Report on Form 10-K  under the  heading  "Cautionary  Statements."
Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date hereof.  The Company undertakes no obligation to
update any forward-looking statements.

Earnings Summary
     Net income for the three months ended June 30, 1999 was $126.5 million,  an
increase  of 101% over net income of $62.9  million for the three  months  ended
June 30,  1998.  Net income for the six  months  ended June 30,  1999 was $240.0
million,  an  increase  of 102% over net  income of $119.0  million  for the six
months  ended  June 30,  1998.  This  increase  was  primarily  attributable  to
continued growth in customer accounts and loans outstanding and strong growth in
fee revenue.

     In May 1999, following extensive media coverage highlighting certain of the
Company's sales and collections  practices,  the Company  introduced an enhanced
customer satisfaction program. Under this program, the Company announced that it
will reverse late fees that customers feel have been wrongly  charged,  allow an
extra two days to  receive  payments  from  customers  before  assessing  a late
charge,  review  all  customer  offers  to insure  that  they are  clear  from a
customer's  perspective,  and  cancel  any  add-on  products,  including  Credit
Protection,  if customers  feel they were misled or are not getting  appropriate
value,  and refund the fee for such products for up to a full year. In addition,
the Company established an 800-customer service line for customers who feel they
have not been  satisfied  through the  Company's  normal  service  centers,  and
engaged an independent third party to examine payment-crediting processes.

     In the course of implementing the enhanced customer  satisfaction  program,
the Company  discovered a programming error that had resulted,  over a period of
months,  in the billing of erroneous late fees related to specific weekend days.
These  errors  have been  corrected,  and steps have been  initiated  to provide
refunds to affected  customers.  The Company  recorded a one-time  charge of $20
million to cover the estimated cost of such refunds.

     The Company continued to strengthen net interest margins while relying less
on low introductory  rates to attract  customers.  As of June 30, 1999,  managed
loans, which include  on-balance sheet and securitized loans,  increased by $4.7
billion,  or 41%, over June 30, 1998. This growth was achieved through increases
in the Company's  loan  originations  (particularly  loans made under lower line
credit  card  products)  combined  with  strategic  acquisitions  of credit card
portfolios and activation of existing customer  accounts.  The Company continues
to evaluate  acquisitions  on an  opportunistic  basis as  competitors  exit the
credit  card  market.  While  the  acquisitions  environment  may  provide  many
opportunities,  the focus of the Company's acquisition strategy will continue to
be guided by its return driven approach.

     The Company's  managed net interest  margin on loans increased to 12.39% in
the second  quarter of 1999 from 11.46% for the same period in 1998,  reflecting
growth in higher  yield  portfolios  and the impact of repricing  programs.  The
managed net credit loss rate for the second  quarter of 1999  decreased to 7.16%
from 7.56% for the same  period in 1998,  reflecting  the  improved  credit loss
rates on our core and acquired  portfolios.  The dollar  contribution to managed
revenue from non-interest  income in the second quarter increased more than 127%
over the same period in 1998 to $494.7  million,  due to increased  revenue from
credit card activity, loan performance fees and membership services. The Company
reinvested a portion of the increased  managed  revenue to strengthen  loan loss
reserves,  increase marketing investment and build  infrastructure,  through the
expansion  of the employee  base and product  support  systems.  Year over year,
non-interest expense increased $189 million during the second quarter of 1999 to
$377.8 million,  reflecting  expenses associated with servicing a greater number
of customers,  increased marketing activity and the $20 million charge described
above with respect to a customer billing error correction.

     The Company's return on average assets continued to improve,  increasing to
5.36% for the second quarter of 1999. The Company's  market focus is to seek out
profitable consumer segments and apply its risk adjusted, return driven approach
to  targeting  and  pricing.   The  Company  believes  this  strategy  has  been
responsible  for its  continued  overall  superior  financial  performance.  The
Company  continued to strengthen  its balance sheet during the second quarter of
1999  with  improved  profitability,  combined  with a  high  level  of  capital
retention,  and was able to  increase  its  return on  equity to 52.19%  for the
second quarter of 1999 from 37.91% for the same period in 1998.

Managed Consumer Loan Portfolio and the Impact of Securitization
     The Company securitizes unsecured credit cards, home equity lines of credit
and secured  and  partially  secured  credit card  receivables.  For  additional
discussion  of the  Company's  securitization  activities,  see  "--Funding  and
Liquidity."  Securitized  assets sold to external  investors are not  considered
assets of the Company and  therefore are not shown on the statement of financial
condition.  It is,  however,  the  Company's  practice to analyze its  financial
performance on a managed loan portfolio  basis. In order to do so, the Company's
income  statement and statement of financial  condition are adjusted to add back
the effect of  securitizations.  The following  table  summarizes  the Company's
managed loan portfolio:

<TABLE>
<CAPTION>
                                                            Three Months Ended                Six Months Ended
                                                                June 30                           June 30
(Dollars in thousands)                                    1999            1998             1999            1998
                                                       --------------------------       --------------------------
<S>                                                    <C>            <C>               <C>            <C>
Period-End Balances:
On-balance sheet consumer loans                                                         $ 8,164,979    $ 4,703,917
Securitized consumer                                                                      8,074,956      6,791,054
                                                                                        -----------    -----------
    Total managed consumer loan portfolio                                               $16,239,935    $11,494,971
                                                                                        ===========    ===========

Average Balances:
On-balance sheet consumer loans                        $ 7,785,664    $ 4,398,017       $ 7,038,259    $ 4,190,478
Securitized consumer loans                               7,542,062      6,860,743         7,522,365      6,710,255
                                                       -----------    -----------       -----------    -----------
    Total average managed consumer loan portfolio      $15,327,726    $11,258,760       $14,560,624    $10,900,733
                                                       ===========    ===========       ===========    ===========

Operating Data and Ratios:
Reported:
       Average earning assets                          $ 8,894,598    $ 5,021,452       $ 8,067,704    $ 4,730,898
       Return on average assets                               5.36%          4.48%             5.55%          4.41%
       Net interest margin (1)                               12.26%         10.57%            11.99%         10.76%
Managed:
       Average earning assets                          $16,436,660    $11,882,195       $15,590,069    $11,441,153
       Return on average assets                               2.98%          1.92%             2.98%          1.88%
       Net interest margin (1)                               12.08%         10.79%            11.95%         10.68%

(1)  Net  interest  margin is equal to net  interest  income  divided by average
     earning assets.

</TABLE>

Financial Statement Impact
     Securitizations  are  treated  as  sales  under  GAAP.  As  a  result,  the
securitized  loans are  removed  from the  balance  sheet in  exchange  for cash
proceeds and other  consideration.  In certain cases, the Company has retained a
subordinated interest in the pool of assets included in a securitization, with a
right to receive its allocated share of collections after payment to third party
investors.  Such retained  interests are recorded at fair value and are included
in "Due from securitization" on the Company's statement of financial condition.

     The Company,  at the time it enters into a  securitization,  recognizes  an
"interest-only strip receivable" asset, available for sale, equal to the present
value of the projected excess servicing income related to the securitized loans.
During the revolving  period of a  securitization,  an additional  interest-only
strip  receivable  is  recognized  each month,  as  additional  receivables  are
transferred to investors in respect of their share of principal  collections and
losses on previously securitized loans.

     The Company  services the accounts  underlying  the  securitized  loans and
earns a monthly  servicing fee, which is generally offset by the servicing costs
incurred by the Company. Accordingly,  servicing assets have not been recognized
in connection  with the Company's  securitizations.  The finance  charge and fee
revenue  generated  by the  securitized  loans in  excess  of  interest  paid to
investors,  related credit losses,  servicing fees, credit enhancement costs and
other transaction  expenses is referred to as "excess servicing income." Revenue
resulting  from  excess  servicing  income is  recognized  each month first as a
reduction of the  interest-only  strip  receivable  and then,  to the extent the
amount  received  exceeds  the  related  component  of the  interest  only strip
receivable   (which  was  recorded  at  present   value),   as   servicing   and
securitizations income.

     The effect of this  accounting  treatment is to reduce net interest  income
and the provision for credit losses, and to increase non-interest income, on the
Company's statement of income. For the three months ended June 30, 1999 and 1998
this  accounting  treatment had the effect of:  reducing net interest  income by
$223.6 million and $187.9  million;  reducing the provision for credit losses by
$146.8 million and $127.6 million;  and increasing  non-interest income by $76.8
million  and  $60.3  million.  For the six  months  ended  June 30,  1999,  this
accounting  treatment had the effect of:  reducing net interest income by $447.4
million and $356.2  million;  reducing the provision for credit losses by $309.6
million and $247.3 million; and increasing non-interest income by $137.8 million
and $108.9 million. Because credit losses on the securitized loans are reflected
as a reduction in servicing and  securitizations  income rather than a reduction
of reserves for credit  losses,  the  Company's  provision  for credit losses is
lower than would be the case had such loans not been securitized.

     When loans are  securitized,  the  Company  retains a  "seller's  interest"
generally  equal to the  total  amount  of the pool of  assets  included  in the
securitization less the investors' portion of those assets. As the amount of the
loans in the securitized  pool fluctuates due to customer  payments,  purchases,
cash advances and credit losses,  the amount of the seller's interest will vary.
The seller's  interest is  classified  on the  Company's  statement of financial
condition  as loans  receivable  at par less  associated  allowance  for  credit
losses.  Periodically,  the Company may elect to transfer  new loan  receivables
into a  securitized  pool in order to maintain  the seller's  interest  above an
agreed-upon minimum balance.

Risk Adjusted Revenue and Return
     One measure of product profitability that incorporates revenue and the most
significant  costs  inherent in  consumer  loan risk  analysis is risk  adjusted
revenue,  which is net interest  income plus fee income less net credit  losses.
The  Company  uses  risk  adjusted  revenue  as  a  measure  of  loan  portfolio
profitability, consistent with its goal of matching the revenue base of customer
accounts with the risk  undertaken.  Risk adjusted revenue may also be expressed
as a percentage of average  consumer  loans,  in which case it is referred to as
risk adjusted return.

     Managed  risk  adjusted  revenue and return for the three months ended June
30, 1999 were $695.2  million and 18.14%,  compared to $327.5 million and 11.63%
for the three months ended June 30, 1998. For the six months ended June 30, 1999
risk adjusted revenue and return were $1,271.2  million and 17.46%,  compared to
$603.9  million and 11.08% for the six months ended June 30, 1998.  The increase
during the second quarter of 1999 is a result of increased  yields on portfolios
priced  according to customer risk,  declining use of introductory  rates on new
accounts and strong growth in fee revenue per customer.

     The  components  of risk  adjusted  revenue are discussed in more detail in
subsequent  sections of this  Management's  Discussion and Analysis of Financial
Condition and Results of Operations.

Net Interest Income and Margin
     Net interest income is interest earned from loan and investment  portfolios
less interest  expense on deposits and  borrowings.  Managed net interest income
includes  interest earned from on-balance sheet and securitized  portfolios less
interest  expense on deposits and  borrowings  and the coupon  interest  paid to
securitization investors.

     Managed net  interest  income for the three  months ended June 30, 1999 was
$496.2  million,  compared to $320.6  million  for the same  period in 1998,  an
increase  of $175.6  million  or 55%.  Managed  net  interest  margin on average
managed loans increased to 12.39% for the three months ended June 30, 1999, from
11.46%  for the same  period in 1998.  For the six months  ended June 30,  1999,
managed net interest income was $931.1  million,  compared to $610.7 million for
the same  period in 1998,  an  increase  of $320.4  million or 52%.  Managed net
interest  margin on average managed loans increased to 12.33% for the six months
ended June 30,  1999,  from 11.29% for the same period in 1998.  The increase in
managed net interest  income and margin  reflects an increase in average managed
loans,  which  increased  approximately  $4.1 billion for the three months ended
June 30 1999,  combined with higher finance charge yields related to an increase
in the number of accounts for lower line credit card  products,  which  generate
higher  overall  finance  charge  rates  and fee  income,  consistent  with  the
Company's risk adjusted approach to pricing.

Statement of Average Balances, Income and Expense, Yields and Rates
     The  following  table  provides an analysis  of interest  income,  interest
expense,  net interest spread, and average balances for the three and six months
ended June 30, 1999 and 1998.  Interest income and interest  expense margins are
presented  as  a  percentage   of  average   earning   assets,   which   include
interest-earning  consumer loan  portfolios and  investments  held for liquidity
purposes.

<TABLE>
<CAPTION>
                                                            Three Months Ended June 30
                                   --------------------------------------------------------------------------------
                                                     1999                                    1998
                                   --------------------------------------------------------------------------------
                                      Average        Income/      Yield/       Average       Income/      Yield/
(Dollars in thousands)                Balance        Expense       Rate        Balance       Expense       Rate
                                   ------------    ----------    --------    -----------    ---------    ----------
<S>                                <C>             <C>            <C>        <C>            <C>            <C>
ASSETS:
Interest-Earning assets
     Consumer loans                $ 7,785,664     $ 358,449      18.42%     $ 4,398,017    $ 185,213      16.85%
     Interest-earning cash             162,947         1,796       4.41%          22,095          299       5.41%
     Federal funds sold                573,618         6,920       4.83%         220,394        3,042       5.52%
     Investment securities             372,369         5,764       6.19%         380,946        5,666       5.95%
                                   ------------    ---------     --------    -----------    ---------    ----------
Total interest-earning assets        8,894,598     $ 372,929      16.77%       5,021,452    $ 194,220      15.47%

Allowance for loan losses             (617,980)                                 (300,638)
Other assets                         1,153,420                                   894,863
                                   ------------                              -----------
Total assets                       $ 9,430,038                               $ 5,615,677
                                   ============                              ===========


LIABILITIES AND EQUITY:
Interest-bearing liabilities
     Deposits                      $ 5,580,966     $  73,790       5.29%     $ 3,588,554    $  48,970       5.46%
     Borrowings                      1,804,499        26,480       5.87%         826,600       12,561       6.08%
                                   -----------     ---------      -------    -----------    ---------    ----------
Total interest-bearing liabilities   7,385,465     $ 100,270       5.43%       4,415,154    $  61,531       5.57%

Other liabilities                      915,127                                   377,171
                                   ------------                              -----------
Total liabilities                    8,300,592                                 4,792,325

Capital securities                     160,000                                   160,000

Equity                                 969,446                                   663,352
                                   ------------                              -----------
Total liabilities and equity       $ 9,430,038                               $ 5,615,677
                                   ============                              ===========

NET INTEREST SPREAD:                                              11.34%                                    9.90%
                                                                  =======                                ==========

Interest income to
     average interest-earning assets                              16.77%                                   15.47%
Interest expense to
     average interest-earning assets                               4.51%                                    4.90%
                                                                 --------                                ----------
Net interest margin                                               12.26%                                   10.57%
                                                                 ========                                ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                 Six Months Ended June 30
                                   --------------------------------------------------------------------------------
                                                     1999                                    1998
                                   --------------------------------------------------------------------------------
                                      Average        Income/      Yield/       Average       Income/      Yield/
(Dollars in thousands)                Balance        Expense       Rate        Balance       Expense       Rate
                                   ------------    ----------    --------    -----------    ---------    ----------
<S>                                <C>             <C>            <C>        <C>            <C>            <C>
ASSETS:
Interest-Earning assets
      Consumer loans               $ 7,038,259     $ 637,574      18.12%     $ 4,190,478    $ 355,283      16.96%
      Interest-earning cash            129,522         2,971       4.59%          31,477          855       5.43%
      Federal funds sold               526,572        12,623       4.79%         215,936        5,945       5.51%
      Investment securities            373,351        11,377       6.09%         293,007        8,714       5.95%
                                   ------------    ----------    --------    -----------    ---------    ----------
Total interest-earning assets        8,067,704     $ 664,545      16.47%       4,730,898    $ 370,797      15.68%

Allowance for loan losses             (564,443)                                 (266,193)
Other assets                         1,139,154                                   927,135
                                   ------------                              -----------
Total assets                       $ 8,642,415                               $ 5,391,840
                                   ============                              ===========

LIABILITIES AND EQUITY:
Interest-bearing liabilities
      Deposits                     $ 5,256,773     $ 138,229       5.26%     $ 3,507,344    $  95,124        5.42%
      Borrowings                     1,445,954        42,542       5.88%         707,600       21,163        5.98%
                                   ------------    ----------    --------    -----------    ---------    -----------
Total interest-bearing liabilities   6,702,727     $ 180,771       5.39%       4,214,944    $ 116,287        5.52%

Other liabilities                      860,484                                   374,725
                                   ------------                              -----------
Total liabilities                    7,563,211                                 4,589,669

Capital securities                     160,000                                   160,000

Equity                                 919,204                                   642,171
                                   -------------                             -----------
Total liabilities and equity       $ 8,642,415                               $ 5,391,840
                                   =============                             ===========

NET INTEREST SPREAD:                                              11.08%                                    10.16%
                                                                 ========                                ===========


Interest income to
      average interest-earning assets                             16.47%                                    15.68%
Interest expense to
      average interest-earning assets                              4.48%                                     4.92%
                                                                 ---------                               -----------
Net interest margin                                               11.99%                                    10.76%
                                                                 =========                               ===========
</TABLE>

Interest Volume and Rate Variance Analysis
     Net  interest  income is affected by changes in the average  interest  rate
earned  on  interest-earning  assets  and  the  average  interest  rate  paid on
interest-bearing liabilities. Net interest income is also affected by changes in
the volume of  interest-earning  assets and  interest-bearing  liabilities.  The
following  table sets  forth the dollar  amount of the  increase  (decrease)  in
interest  income and interest  expense  resulting from changes in the volume and
rates:

<TABLE>
<CAPTION>
                                        Three Months Ended June 30                      Six Months Ended June 30
                                               1999 vs. 1998                                  1999 vs. 1998
                              -----------------------------------------------------------------------------------------------
                                 Increase           Change due to (1)           Increase            Change due to (1)
                                              -------------------------------                 -------------------------------
(Dollars in thousands)          (Decrease)        Volume           Rate        (Decrease)         Volume           Rate
                              --------------  --------------   --------------  ------------   --------------   --------------
<S>                              <C>             <C>              <C>           <C>            <C>              <C>
Interest Income:
Consumer loans                   $ 173,236       $ 154,542        $ 18,694      $ 282,291      $ 256,478        $ 25,813
Federal funds sold                   3,878           4,303            (425)         6,678          7,547            (869)
Other securities                     1,595           1,433             162          4,779          4,721              58
                              --------------  --------------   --------------  ------------   --------------   --------------
    Total interest income          178,709         160,278          18,431        293,748        268,746          25,002

Interest Expense:
Deposits                            24,820          26,390          (1,570)        43,105         45,995          (2,890)
Borrowings                          13,919          14,367            (448)        21,379         21,738            (359)
                              --------------  --------------   --------------  ------------   --------------   --------------
    Total interest expense          38,739          40,757          (2,018)        64,484         67,733          (3,249)
                              --------------  --------------   --------------  ------------   --------------   --------------
    Net interest income          $ 139,970       $ 119,521        $ 20,449      $ 229,264      $ 201,013        $ 28,251
                              ==============  ==============   ==============  ============   ==============   ==============

(1) The changes due to both volume and rates have been  allocated in  proportion
to the  relationship  of the absolute  dollar amounts of the change in each. The
changes in interest  income and expense are  calculated  independently  for each
line in the schedule.
</TABLE>

Non-Interest Income
     Non-interest  income  consists  primarily of servicing  and  securitization
income and credit  product  fee  income.  Total  non-interest  income  increased
105.6%, or $293.4 million, to $571.5 million for the second quarter of 1999 over
the same period in 1998.  This  increase is  attributable  to  increased  credit
product  fee income  realized  from  membership  services  and  increased  late,
overlimit, annual membership and processing fees.

Servicing and Securitization Income
     As of June 30,  1999,  securitizations  outstanding  provided $8 billion in
funding,  representing 45% of total managed funding, compared with $6.8 billion,
or 54%, as of June 30, 1998.  The decrease in  securitizations  outstanding as a
percentage of total managed funding as of June 30, 1999 was due to the Company's
efforts to diversify its funding sources and increase  deposit  funding.  A more
detailed  discussion  of the  Company's  securitization  activities is set forth
under "--Funding and Liquidity."

     Because excess servicing income on securitized loans essentially represents
a  recharacterization  of net interest income and credit product fee income less
the provision for loan losses and servicing  expense,  excess  servicing  income
will vary based upon the same factors.  Thus,  changes in net credit losses (see
"--Asset  Quality,  Net Credit  Losses")  and changes in interest  rates (to the
extent that the  receivables  and interest  payable to investors  are based upon
floating   rates)   will   cause   excess   servicing   income   to  vary   (see
"--Asset/Liability Risk Management").

     Servicing and securitization  income totaled $148.8 million for the quarter
ended June 30, 1999 as compared to $156.7 million for the quarter ended June 30,
1998.  For the six months  ended June 30,  1999,  servicing  and  securitization
income was $280.0  million  compared  to $270.8  million  for the same period in
1998.  Excess  servicing  revenue on  securitized  loans  remained  stable  with
increasing  finance  charge and fee yields  being  offset by increases in credit
losses related to the  securitization  of acquired  portfolios.  For the quarter
ended June 30, 1999, the year over year decline in servicing and  securitization
income  results from a reduction in interest  earning  securitization  principal
funding  accounts  maintained  in the prior year to fund the repayment of trusts
that matured in June 1998.

Credit Product Fee Income
     For the three  months  ended June 30,  1999 and 1998,  credit  product  fee
income  increased to $414.8  million  from $120.8  million,  reflecting  account
growth,  loan  receivable  growth,  increased  sales of membership  services and
increases in late fee rates. Fee revenue realized from securitized  loans is not
included  in credit  product  fee  income  but is  instead  recorded  as part of
servicing and securitization  income.  While the Company  anticipates  continued
significant  growth in credit  product fee income  during 1999,  there can be no
assurance  that the historic rate of growth  reflected in the  Company's  second
quarter 1999 and in previous periods will continue.

     Credit product fee income includes activity fees, loan performance fees and
membership  services  revenues.  Strong  growth  in  new  customers,  membership
services  revenue and activity fees contributed to an increase in credit product
fee income over the first quarter of 1999,  offsetting a modest  decline in loan
performance  fees.  Activity  fees,  which include  interchange  income and cash
advance, annual membership and processing fees, totaled $199.9 million and $83.8
million for the three  months  ended June 30, 1999 and 1998.  For the six months
ended June 30, 1999 and 1998  activity  fees totaled  $352.0  million and $140.5
million.  Activity  fees have  increased  as a result of  increases  in customer
accounts that resulted in increased annual membership, cash advance and purchase
activity fees. Loan performance fees include late,  returned check and overlimit
charges. For the three months ended June 30, 1999 and 1998 loan performance fees
totaled $87.0 million and $24.3 million,  reflecting account growth and late fee
rate increases. For the six months ended June 30, 1999 and 1998 loan performance
fees totaled  $182.8  million and $44.5  million.  Membership  services  revenue
results from the sale of Credit  Protection,  Home Protection,  Providian Health
Advantage,  DrivePro and PricePro(1) products. The Company recognizes membership
services  revenue ratably over the term of the product,  net of an allowance for
estimated refunds,  beginning after the end of the free or money-back  guarantee
period,  if any. For the three  months ended June 30, 1999 and 1998,  membership
services revenue totaled $127.9 million and $12.8 million,  reflecting increased
penetration rates for sales of these products and increases in the customer base
of the Company's lower line credit card product offerings, which generate higher
levels of membership  services  revenue.  For the six months ended June 30, 1999
and 1998 membership services revenue totaled $221.8 million and $32.3 million.

Non-Interest Expense
     Non-interest  expense includes loan  solicitation  costs, such as printing,
postage,  telemarketing,  list  processing and credit bureau costs paid to third
parties in connection with direct marketing  account  solicitation  efforts.  In
accordance  with  GAAP,  the  Company  has  capitalized  only the  direct  costs
associated  with  successful  account  acquisition  efforts,   after  offsetting
up-front processing fees.  Capitalized loan origination costs are amortized over
the privilege period (currently one year) for credit card loans or the estimated
life of the loans for home equity  lines of credit  loans,  unless the loans are
securitized,  in which  case the  costs  are  taken as an  expense  prior to the
securitization. The majority of loan origination costs are expensed as incurred.
For the three months ended June 30, 1999 and 1998, loan  origination  costs were
$102.2 million and $46.7 million,  reflecting  increased direct mail volumes and
other marketing  initiatives.  In the three months ended June 30, 1999 and 1998,
the Company  amortized loan origination costs of $15.4 million and $9.9 million.
For the six months ended June 30, 1999 and 1998,  overall loan origination costs
were $201.7  million and $88.3 million while  amortized loan  origination  costs
were $26.6 million and $19.7 million.


     (1)  Credit  Protection,  Home  Protection,   Providian  Health  Advantage,
DrivePro and PricePro are registered service marks of Providian Financial.



<PAGE>

     Non-interest  expense also includes  salary and benefit  expenses,  such as
staffing costs associated with marketing,  customer  service,  collections,  and
administration.  Other non-interest expense includes third-party data processing
and communication  costs,  occupancy expenses,  and other operational  expenses,
such as collection costs,  fraud losses, and bankcard  association  assessments.
The following table presents  non-interest  expense for the three and six months
ended June 30, 1999 and 1998:

<TABLE>
                                                         Three months Ended June 30          Six months Ended June 30
                                                      ---------------------------------- ----------------------------------
   (Dollars in thousands)                                  1999              1998              1999             1998
   -------------------------------------------------- ---------------- ----------------- ----------------- ----------------
<S>                                                   <C>              <C>               <C>               <C>
   Non-interest Expense:
   Salaries and employee benefits                           $ 121,784          $ 60,911         $ 217,771        $ 120,645
   Solicitation                                               102,231            46,663           201,678           88,275
   Occupancy, furniture and equipment                          18,877            11,088            34,181           22,354
   Data processing and communications                          29,852            22,080            54,614           37,834
   Other                                                      105,096            48,183           186,702          101,870
                                                      ---------------- ----------------- ----------------- ----------------
          Total                                              $377,840          $188,925          $694,946         $370,978
                                                      ================ ================= ================= ================
</TABLE>

Impact of Year 2000
     Many  computer  programs  use two digits,  rather than four,  to refer to a
year.  Unless  these  programs are  corrected,  they will be unable to interpret
dates beyond the year 1999, which could cause a system failure or other computer
errors.  The  Company,  like all  financial  services  institutions,  is heavily
dependent on computer  systems for its  operations.  The Company  processes data
through its own  information  technology  systems and the systems of third party
vendors and providers. In addition,  various non-information  technology systems
are affected by the Year 2000 issue,  including elevators,  security systems and
life safety systems.

     To  address  this  problem,  and in  accordance  with Year  2000  readiness
guidelines  established by the Office of the Comptroller of the Currency and the
Federal  Deposit  Insurance  Corporation,  which regulate the Company's  banking
subsidiaries,  the Company  launched a Year 2000 project in November  1996.  The
Company's Year 2000 project consists of five phases: (1) planning,  in which the
Year 2000 project team defines the approach to  addressing  the Year 2000 issue;
(2) inventory,  in which the Company's vendors,  hardware,  internally developed
systems and third  party-provided  software are inventoried and critical systems
and critical vendors identified; (3) assessment, in which Year 2000 readiness of
the Company's systems is assessed;  (4) modification,  in which affected systems
are replaced,  repaired,  upgraded,  or retired; and (5) testing, in which final
testing is performed for Year 2000 compliance.

     The Company is currently in conformity  with its banking  regulators'  Year
2000 requirements.  The planning, inventory, and assessment phases are complete,
including the inventory and assessment of critical  systems and vendors.  In the
modification  phase,  the  Company   substantially   completed   remediation  of
internally  developed  systems in June 1998.  Repair  and  replacement  of third
party-provided hardware and software were substantially complete as of March 31,
1999,  and  infrastructure  upgrades  were complete as of June 30, 1999. In July
1998,   the  Company   began   testing  its   internally   developed  and  third
party-provided systems for Year 2000 compliance. Testing of internally developed
critical systems was substantially  completed in December 1998, while testing of
third  party-provided  critical systems was substantially  completed as of March
31, 1999. Final testing of all systems was completed July 31, 1999.

     The Company  depends on  technology  and other  services  provided by third
parties,   including  technology  vendors,  credit  providers,   and  processing
providers,  and on financial  systems (such as payment and clearing systems) and
the   utility    infrastructure    (such   as   power,    transportation,    and
telecommunications).  The Company  relies on these  third  parties to assess the
impact of the Year 2000 issue on the technology and services they provide and to
take any necessary  corrective  action. A significant  majority of the Company's
critical  vendors  represented  to the Company  that their  systems and products
would be Year 2000  compliant  by June 30,  1999.  The Company  has  selectively
conducted  tests of its critical  vendors and other third parties and determined
that  substantially  all of such  tested  vendors and third  parties  have taken
corrective  actions and have completed  testing as of June 30, 1999. The Company
is currently monitoring the progress of certain utilities and  telecommunication
service  providers.  The majority of these service providers have represented to
the Company  that their  systems  will be Year 2000  compliant by the end of the
third quarter of 1999.

     Year 2000 issues could result in  significant  disruption  to the Company's
operations (including loan origination and servicing), its ability to obtain and
provide funds, and its financial and accounting systems.  Such disruptions could
result in revenue loss and  increased  costs that could have a material  adverse
effect  on  the  Company's  financial   condition,   liquidity  and  results  of
operations. There can be no assurance that remediation efforts of the Company or
of  third  party  vendors  and  suppliers  have  addressed  all  risks  of  such
disruption.  Disruptions that could result from the Company's failure to correct
its critical systems or the failure of third parties on which the Company relies
to  correct  their  systems  have  been  addressed  in the  Company's  Year 2000
contingency plans and business resumption and disaster recovery plans. There can
be no assurance,  however,  that such contingency plans will fully mitigate Year
2000 failures or problems.

     The   Company's   total  Year  2000  project   costs  are  expected  to  be
approximately $13.5 million,  and the Company has incurred $10.1 million in Year
2000 project  expenses  through June 30, 1999.  The Company  expects to fund all
Year  2000-related  costs through  operating cash flows. Year 2000 costs will be
expensed as incurred,  and the Company  believes that such costs will not have a
material impact on the Company's future financial results or condition.

     The foregoing Year 2000 discussion  contains  "forward-looking  statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements,  including  statements regarding the expected costs of the Company's
Year 2000  project,  are based on  estimates,  and  actual  results  may  differ
materially from those anticipated.  Specific factors that might cause results to
differ from those anticipated  include, but are not limited to, the availability
of  qualified  personnel,  success in  identifying  and  modifying  all relevant
computer  systems,  the sufficiency  and outcome of Year 2000 testing,  adequate
resolution of Year 2000 issues by  governmental  agencies,  businesses and other
third  party  providers  to  the  Company,   and   unanticipated   costs.   Such
"forward-looking  statements" speak only as of the date on which such statements
are made, and the Company undertakes no obligation to update any forward-looking
statement.

Income Taxes
     The  Company  recognized  income  tax  expense of $84.6  million  and $41.1
million  for the  three  months  ended  June 30,  1999 and 1998.  The  Company's
effective tax rate  increased to 40.07% for the three months ended June 30, 1999
from 39.51% for the same period in 1998.

Asset Quality
     The  Company's  delinquencies  and net credit losses  reflect,  among other
factors, the quality of loans, the average age of the Company's loan receivables
(generally referred to as "seasoning"),  the success of the Company's collection
efforts, and general economic conditions. The quality of loans is subject to the
targeting and underwriting  criteria used, account  management,  seasoning,  and
demographic and other factors.

     The level of credit  losses  directly  affects  earnings  when reserves are
established  through  recognition  of provisions  for credit  losses,  which are
generally dependent on historical levels of credit losses and current trends. As
new  portfolios of consumer loans are  originated or acquired,  management  uses
historical credit loss and delinquency  analyses of similar,  more seasoned loan
portfolios and other qualitative factors to establish reserves for future credit
losses (see "--Allowance and Provision for Credit Losses"). As net credit losses
are experienced, the previously established reserve is used to absorb the credit
losses.

     The  Company's  policy  is to  recognize  principal  credit  losses  on all
unsecured loans (including the unsecured portion of any partially secured credit
card loans) which become  delinquent no more than 180 days after the delinquency
occurs,  unless the accountholder  cures the default by making a partial payment
that qualifies under the Company's  standards.  Accounts of bankrupt credit card
customers are charged off upon notification of bankruptcy.  Accounts of deceased
credit card customers are charged off upon  determination  of  uncollectibility.
Home loans are reviewed when a loss of all or part of the  principal  balance of
the loan is  anticipated,  and an allowance for credit losses is  established in
the  amount  by which  the book  value of the loan  exceeds  the  estimated  net
realizable value of the underlying collateral.  Anticipated losses on home loans
are  charged  off no later than 180 days  after  payments  on such loans  become
delinquent. At the time a loan is charged off, accrued but unpaid finance charge
and fee income is reversed  against  current  earnings but is  maintained on the
customer's record in the event of a future recovery. Once a loan is charged off,
the Company's policy is to continue to pursue collection of principal, interest,
and  accrued fee  income,  to the extent  legally  permissible.  Any  subsequent
collections on previously charged-off loans will be recognized as recoveries.

Delinquencies
     The  following  table  presents  the  delinquency  trends of the  Company's
on-balance  sheet and managed  consumer  loan  portfolio as of June 30, 1999 and
1998.  An account is  contractually  delinquent  if the  minimum  payment is not
received by the next billing  date.  Total  delinquencies  on managed loans were
4.7% as of June 30, 1999  compared to 4.9% as of June 30,  1998,  and 4.9% as of
March 31, 1999.  The decrease in  delinquencies  over the second quarter of 1998
reflects  improving  trends  in  the  Company's  gold,   platinum  and  acquired
portfolios offset by seasoning in its low line product portfolio.

<TABLE>
<CAPTION>
                                                                June 30
                                -------------------------------------------------------------------------
                                      1999                                   1998
                                -------------------------------------------------------------------------
                                                        % of                                   % of
                                                        Total                                  Total
(Dollars in thousands)               Loans              Loans               Loans              Loans
                                ---------------    ---------------     ---------------    ---------------
<S>                                 <C>                 <C>               <C>                  <C>
Reported:
Loans outstanding                   $ 8,164,979         100.00%           $ 4,703,917          100.00%
Loans delinquent:
     30 - 59 days                       158,234           1.94%                97,953            2.08%
     60 - 89 days                       101,321           1.24%                59,866            1.27%
     90 or more days                    186,591           2.28%               125,012            2.66%
                                ---------------     --------------     ---------------    ---------------
     Total                          $   446,146           5.46%           $   282,831            6.01%
                                ===============     ==============     ===============    ===============
Managed:
Loans outstanding                   $16,239,935         100.00%           $11,494,971          100.00%
Loans delinquent:
     30 - 59 days                       276,929           1.71%               197,108            1.72%
     60 - 89 days                       171,009           1.05%               122,841            1.07%
     90 or more days                    314,772           1.94%               242,933            2.11%
                                ---------------     --------------     ---------------    ---------------
     Total                          $   762,710           4.70%             $ 562,882            4.90%
                                ===============     ==============     ===============    ===============
</TABLE>

Net Credit Losses
     Net credit losses for consumer loans include the principal amount of losses
from  customers  unwilling  or  unable  to  pay  their  existing  loan  balances
(including  charged-off  bankrupt and deceased customer accounts),  less current
period  recoveries.  Principal  amounts  include cash advances,  purchases,  and
certain financed  membership services revenue and exclude accrued finance charge
and other fee income, which is charged against the related income at the time of
credit loss  recognition.  Losses for cardholder  accounts related to fraudulent
activity are included in other non-interest expenses.

     The  annualized  managed  net credit loss rate  decreased  to 7.16% for the
second  quarter  of  1999,  compared  to  7.56%  for the  same  period  in 1998,
reflecting an improved credit loss rate on acquired portfolios.  The managed net
credit  loss  rates  for the first  six  months of 1999 and 1998 were  7.38% and
7.18%. The Company's  pricing for finance charge and fee income  incorporates an
expected higher credit loss rate when appropriate, consistent with the Company's
efforts to generate income using a risk adjusted return approach.

     The  following  table  presents the  Company's net credit losses and credit
loss rates for consumer loans for the periods indicated and is presented both on
a financial statement reporting basis and a managed portfolio basis:

<TABLE>
<CAPTION>

                                                              Three Months Ended                   Six Months Ended
                                                                   June 30                             June 30
                                                       --------------------------------------------------------------------
(Dollars in thousands)                                      1999              1998              1999              1998
                                                       --------------    --------------    --------------    --------------
<S>                                                       <C>               <C>               <C>               <C>
Reported:
Average loans outstanding                                 $ 7,785,664       $ 4,398,017       $ 7,038,259       $ 4,190,478
Net charge-offs                                           $   127,653       $    85,094       $   227,626       $   143,989
Net charge-offs as a percentage
   of average loans outstanding                                  6.56%             7.74%             6.47%             6.87%

Managed:
Average loans outstanding                                 $15,327,726       $11,258,760       $14,560,624       $10,900,733
Net charge-offs                                           $   274,436       $   212,696       $   537,195       $   391,214
Net charge-offs as a percentage
   of average loans outstanding                                  7.16%             7.56%             7.38%             7.18%

</TABLE>

Allowance and Provision for Credit Losses
     The Company  maintains the allowance for credit losses at a level  believed
to be adequate to absorb future credit losses,  net of  recoveries,  inherent in
the existing  on-balance  sheet  portfolio.  The  allowance for credit losses is
maintained  for  on-balance  sheet  loans  only (see  "--Managed  Consumer  Loan
Portfolio and the Impact of Securitization").  The entire allowance is allocated
to designated portfolios or pools of the Company's on-balance sheet loans.

     The  following  table sets forth the activity in the  allowance  for credit
losses for the periods indicated.

<TABLE>
<CAPTION>
                                                              Three Months Ended                   Six Months Ended
                                                                   June 30                             June 30
                                                       --------------------------------------------------------------------
(Dollars in thousands)                                      1999              1998              1999              1998
                                                       --------------    --------------    --------------    --------------
<S>                                                       <C>               <C>                 <C>               <C>

Balance at beginning of period                            $   547,655       $   249,440         $ 451,245         $ 145,312
Provision for credit  losses                                  255,222           117,851           437,295           175,507
Reserve acquired                                                    -            73,592            14,310           178,959
Charge-offs                                                  (150,282)          (91,495)         (265,788)         (155,915)
Recoveries                                                     22,629             6,401            38,162            11,926
                                                       --------------    --------------    --------------    --------------
Net charge-offs                                              (127,653)          (85,094)         (227,626)         (143,989)
                                                       --------------    --------------    --------------    --------------
Balance at end of period                                  $   675,224       $   355,789         $ 675,224         $ 355,789
                                                       ==============    ==============    ==============    ==============

Allowance for credit losses to loans at period-end                                                   8.27%             7.56%
</TABLE>

The  allowance  for  credit  losses  increased  to $675.2  million,  or 8.27% of
on-balance  sheet loans, as of June 30, 1999,  from $451.2 million,  or 7.86% of
on-balance  sheet loans,  as of December 31, 1998. The increase in the allowance
for credit losses as a percentage of on-balance sheet loans reflects an increase
in loans under lower line credit card products,  which are generally expected to
experience higher credit loss rates (see " -Risk Adjusted Return and Revenue").

Funding and Liquidity
     The Company funds its assets through a diversified mix of funding  products
designed to appeal to a broad range of investors.  It is the goal of the Company
to generate funding at the lowest cost possible consistent with ensuring prudent
liquidity and interest rate risk management.

     The primary goal of liquidity  management  at the Company is to ensure that
funding will be  available to support  Company  operations  in varying  business
environments.  The  Company  employs  multiple  strategies  to maintain a strong
liquidity   position:   diversification   of  funding  sources;   dispersion  of
maturities;  maintenance of committed  credit  facilities;  and maintenance of a
prudent investment portfolio and cash balances.

     The  Company's  approach  to  funding  its  assets  is to seek  diversified
distribution channels for a variety of products. Products offered include retail
and institutional  deposits,  money market accounts,  term federal funds, public
and private asset securitizations and bank notes.  Distribution channels include
direct phone and mail,  brokerage and investment  banking  relationships and the
internet.

     The Company offers a wide range of maturity terms for its funding  products
(from one week to thirty years). Actual maturity distributions depend on several
factors,  including  expected asset duration,  investor demand,  relative costs,
shape of the yield curve,  and anticipated  issuance in the  securitization  and
capital markets. Maturities are managed by the types of funding sources employed
and by the rates offered on different products.  The Company strives to maintain
a balanced  distribution of maturities,  avoiding undue concentration in any one
period.  The  Company  monitors  existing  funding  maturities  and loan  growth
projections to ensure that prudent amounts of backup  liquidity are available to
support the maturities, if necessary.

     The following table summarizes the contractual  maturity of deposits at the
Company as of June 30, 1999 and 1998.

<TABLE>
<CAPTION>
                                                       June 30, 1999                                  June 30, 1998
                                        -------------------------------------------------------------------------------------------
                                            Direct         Other          Total            Direct         Other          Total
(Dollars in thousands)                     Deposits       Deposits       Deposits         Deposits       Deposits       Deposits
                                        -------------- -------------- --------------   -------------- -------------- --------------
<S>                                        <C>            <C>            <C>              <C>            <C>            <C>
Three months or less                       $   477,670    $   246,273    $   723,943      $   295,621    $   235,773    $   531,394
Over three months through 12 months          1,245,115        691,940      1,937,055          749,287        361,705      1,110,992
Over one year through five years             1,056,075      1,191,236      2,247,311          521,947        580,550      1,102,497
Over five years                                      -         15,000         15,000                -              -              -
Deposits without contractual maturity        1,005,779         68,492      1,074,271          921,111         65,156        986,267
                                        -------------- -------------- --------------   -------------- -------------- --------------
     Total Deposits                        $ 3,784,639    $ 2,212,941    $ 5,997,580      $ 2,487,966    $ 1,243,184    $ 3,731,150
                                        ============== ============== ==============   ============== ============== ==============
</TABLE>

     Deposits increased to $6.0 billion as of June 30, 1999 from $4.7 billion as
of December 31, 1998. This increase is  attributable to the Company's  strategic
decision to increase  deposit  funding  and the strong  demand for  FDIC-insured
deposits.

     During  the  first six  months of 1999,  the  Company,  through  one of its
banking  subsidiaries,   issued  $630  million  senior  bank  notes,  increasing
long-term  borrowings  to a total of  approximately  $1.0 billion as of June 30,
1999 from $400 million as of December 31, 1998.  The  following  table shows the
Company's unsecured funding availability and outstandings as of June 30, 1999.

<TABLE>
<CAPTION>
                                                                              June 30, 1999
                                                      ------------------------------------------------------------
                                                       Effective/                       Outstanding,      Final
(Dollars or dollar equivalents in thousands)           Issue Date   Availability (1)        Net          Maturity
                                                      -----------   ----------------    ------------     ---------
<S>                                                   <C>           <C>                 <C>              <C>
Senior and subordinated Bank Note program (2)                2/98        $4,000,000      $1,029,305         2/13
Short-term credit facilities (two 364 day facilities)     Various           175,000              --      Various
Long-term credit facility                                    1/99         1,000,000              --         1/03
Providian Financial shelf registration                       6/98         2,000,000              --           --
Capital Securities                                           2/97           160,000         160,000         2/27

(1)  All funding sources are revolving  except for the Providian  Financial
     shelf registration and the Capital Securities. Funding availability is
     subject to market conditions.

(2)  Includes availability to issue up to $500 million of subordinated bank
     notes, none outstanding as of June 30, 1999.

</TABLE>

     On April 26, 1999, the Company entered into a new revolving credit facility
to finance the Company's  expansion  into the United  Kingdom.  The UK revolving
credit facility,  in the amount of (pound)25  million ($40.3 million  equivalent
based on the exchange rate at closing) has an expiration date of April 25, 2000.
On April 27, 1999, the Company borrowed  (pound)10 million ($16.2 million) under
this facility.

     The Company's securitizations are diversified across the public and private
securitization  markets and across  maturity  terms.  The primary  objectives of
securitization  are to diversify  funding sources and to obtain efficient all-in
cost of funds,  including the cost of capital.  The securitized loans are pooled
to provide cash flow for  securities  sold to investors  using legal  structures
that generally  provide for an interest only (revolving)  period and a principal
repayment  (amortization  or  accumulation)  period.  Under  the  terms  of  the
securitizations,   once  the  amortization  or  accumulation  period  commences,
payments on the securitized  loans are distributed or accumulated for payment to
the securitization  investors and the Company's  on-balance sheet portion of the
securitized pool of assets will increase.

     During  the  second  quarter  of  1999,  the  Company  completed  two  term
securitizations  totaling approximately $1.1 billion. In April 1999, the Company
issued,  through a trust, $500 million in certificates with an estimated term of
60 months  backed by home equity  loan  receivables.  In June 1999,  through the
Providian  Master  Trust,  the  Company  issued  approximately  $619  million in
certificates with a term of 60 months backed by credit card receivables.

     For  diversification  and flexibility,  in addition to publicly issued term
securities, the Company uses commercial paper-based conduit facilities and other
variable funding programs to securitize loan receivables. The conduit facilities
and  variable  funding  programs  are  generally  renewable  annually.  Balances
securitized under conduit and variable funding  facilities  totaled $2.3 billion
as of June 30, 1999.

     The Company's term securitizations are expected to amortize over the
periods indicated below, based on currently outstanding  securitized loans as of
June 30, 1999:

                                                                          Amount
                                                                      Amortizing
          Year                                             (Dollars in millions)
          ----------------------------------- ----------------------------------
          1999                                                            $  256
          2000                                                               979
          2001                                                             1,045
          2002                                                             1,300
          2003                                                             1,387
          2004                                                               652

     The Company believes that it can attract deposits,  borrow funds from other
sources, and issue additional  asset-backed securities to replace securitization
funding  based  on the  amortization  schedule  summarized  above,  although  no
assurances can be given to that effect.

Capital Adequacy
     Each of the Company's  banking  subsidiaries is subject to capital adequacy
guidelines as defined by its primary  federal  regulator.  Core capital (Tier 1)
consists  principally of  shareholder's  equity less goodwill.  Total risk-based
capital  (Tier 1 + Tier 2) includes a portion of the  reserve for credit  losses
and other capital  components.  Based on these  classifications of capital,  the
capital  adequacy  regulations  establish three capital adequacy ratios that are
used to  measure  whether  a  financial  institution  is "well  capitalized"  or
"adequately capitalized":

<TABLE>
<CAPTION>
                                                                           Well            Adequately
                                                                        Capitalized       Capitalized
       Capital Ratio                     Calculation                      Ratios             Ratios
   ---------------------- ------------------------------------------- ---------------- -------------------
<S>                       <C>                                         <C>              <C>
   Total Risk-Based       (Tier 1 + Tier 2)/Total Risk-Based Assets        => 10%          => 8% < 10%
   Tier 1                 Tier 1/Total Risk-Based Assets                   =>  6%          => 4% <  6%
   Leverage               Tier 1/Adjusted average assets                   =>  5%          => 4% <  5%
</TABLE>

     At June 30, 1999,  each of the  Company's  banking  subsidiaries  was "well
capitalized" in all regulatory capital ratio categories, as set forth below:

<TABLE>
<CAPTION>
                                                                         Providian
                                                                          National            Providian
   Capital Ratio                                                            Bank                 Bank
   ----------------------                                             ----------------     ---------------
<S>                                                                        <C>                  <C>
   Total Risk-Based                                                        10.25%               10.88%
   Tier 1                                                                   8.89%                9.55%
   Leverage                                                                10.00%                7.22%
</TABLE>

     In accordance with the banking  regulators'  risk-based  capital standards,
the amount of risk-based  capital that must be maintained for assets transferred
with  recourse  will not  exceed  the  maximum  amount of  recourse  for which a
regulated  entity is  contractually  liable under the recourse  agreement.  This
rule,  known as the low level recourse rule,  applies to transactions  accounted
for as sales under  generally  accepted  accounting  principles  in which a bank
contractually limits its risk of loss or recourse exposure to less than the full
effective minimum risk-based capital requirement for the assets transferred. Low
level  recourse  transactions  arise  when a bank  securitizes  assets  and uses
contractual  cash flows  (such as  interest-only  strip  receivables  and spread
accounts),   retained  subordinated   interests,   or  other  assets  as  credit
enhancements. The Company's banking subsidiaries are required to hold risk-based
capital  equivalent to the maximum recourse exposure on the assets  transferred,
on a net-of-tax basis, not to exceed the amount of risk-based capital that would
be required if the low level recourse rule did not apply.

Asset/Liability Risk Management

     The  business  of the  Company and the  composition  of its  balance  sheet
consist  primarily of investments in  interest-earning  assets (loans receivable
and  investment  securities)  which are  primarily  funded  by  interest-bearing
liabilities  (deposits and borrowings).  As a result, the Company's earnings are
subject to risk  resulting  from interest rate  fluctuations  to the extent that
there is a  difference  between  the amount of  interest-earning  assets and the
amount of interest-bearing  liabilities that mature, reprice, or prepay/withdraw
in a specific period.

     The  Company's   receivables  generally  yield  either  a  variable  Annual
Percentage  Rate  ("APR"),  indexed  to the  prime  rate,  or a fixed  APR,  set
independently  of market  interest  rates.  The interest  rates on the Company's
liabilities  are  generally  indexed to LIBOR or are fixed rates based on United
States Treasury Bond rates. These  characteristics of the Company's  receivables
and  liabilities  expose the  Company to two types of  interest  rate risk:  (a)
repricing  risk,  which  results  from  differences  between  the timing of rate
changes and the timing of cash flows,  which could impact net interest income if
liabilities  reprice  more often than assets,  and (b) basis risk,  which arises
from changing rate relationships  between yield curves and markets,  which could
impact net interest  income derived from variable APR  receivables if the spread
between the prime rate and LIBOR compresses or expands.

     The Company's fixed APR credit card  receivables have no stated maturity or
repricing period. However, the Company's credit card receivables may be repriced
by the Company upon providing the required  prior notice to the customer,  which
is generally no more than 30 days.

     The principal  objective of the Company's  asset/liability  risk management
activities is to monitor and control the Company's  exposure to adverse  effects
resulting from  movements of interest rates over time. The Company  measures and
manages  interest rate risk  individually  for each banking  subsidiary and on a
consolidated  basis,  including  both  on-  and  off-balance  sheet  assets  and
liabilities in its measurement and management.  To measure  exposure to interest
rate  fluctuation,  the Company  uses net  interest  income  ("NII")  simulation
analysis and the market value of portfolio equity ("MVPE") method as its primary
quantitative tools.

     The following table presents the estimated effects of positive and negative
parallel  shifts in interest rates as calculated at June 30, 1999 and takes into
consideration the Company's current hedging activity:

<TABLE>
<CAPTION>
                                                                               June 30, 1999 (1)
                                                                           ---------------------------
   Change in Interest Rates                                                   Percentage Change In
                                                                           ---------------------------
   (In Basis Points)                                                         NII (2)       MVPE (3)
   ----------------------------------------------------------------------- ------------- -------------
   <S>                                                                      <C>           <C>
   +200                                                                       (2.4)%        (8.4)%
   Flat                                                                          0%            0%
   -200                                                                        3.4%         10.8%
</TABLE>

   (1) The  information  shown  is  presented  on  a  consolidated,   managed
   asset/liability   basis,  giving  effect  to  securitizations  and  related
   funding.
   (2) The  percentage  change in this column  represents NII for 12 months in a
   stable  interest  rate  environment  versus  the  NII in the  specified  rate
   scenarios.
   (3) The percentage change in this column represents the MVPE in a
   stable  interest  rate  environment  versus  the MVPE in the  specified  rate
   scenarios.  MVPE is defined as the present  value of expected  net cash flows
   from existing assets, minus the present value of expected net cash flows from
   existing liabilities,  plus the present value of expected net cash flows from
   existing off-balance sheet transactions.

     The table above does not necessarily indicate the effect of general
interest  rate  movements  on the  Company's  net interest  income,  because the
repricing  of  certain  categories  of assets  and  liabilities  is  subject  to
competitive  and other  pressures  beyond the  Company's  control.  As a result,
certain assets and liabilities  assumed to mature or otherwise  reprice within a
certain period may in fact mature or reprice at different times and at different
volumes.

     The Company seeks to mitigate earnings volatility  associated with interest
rate movements by generally  matching the repricing  characteristics  of on- and
off-balance sheet assets and liabilities.  Fixed rate liabilities generally fund
fixed APR assets,  while variable rate  liabilities  generally fund variable APR
assets. Given the Company-directed  repricing characteristics of its credit card
assets and historically  favorable funding rates for variable  liabilities,  the
Company  uses  variable  rate  liabilities  to fund a portion  of its fixed rate
credit card assets.

     The Company uses derivative financial instruments,  including interest rate
swap and cap  agreements,  with  indices  that  correlate  to managed  assets or
liabilities,  to modify its indicated net interest  sensitivity to levels deemed
appropriate based on the Company's risk tolerance.  The objective in using these
hedges is to reduce  interest  rate risk by more closely  aligning the repricing
characteristics of the Company's assets and liabilities.

     All hedging  transactions are  over-the-counter  interest rate swap and cap
transactions  executed with highly rated United States and  international  banks
under  standard  Master  Agreements of the  International  Swap and  Derivatives
Association,  Inc. and hedge identified  interest rate risks both for accounting
and tax purposes.  The Company does not trade in derivatives or use  derivatives
to speculate on interest rates or as an investment vehicle.  The following table
presents the notional amounts of interest rate swap and cap agreements purchased
for the periods indicated:

<TABLE>
<CAPTION>
                                                              Three Months Ended                   Six Months Ended
                                                                   June 30                             June 30
                                                       --------------------------------------------------------------------
(Dollars in thousands)                                      1999              1998              1999              1998
                                                       --------------    --------------    --------------    --------------
<S>                                                       <C>               <C>                 <C>               <C>
Interest rate swap agreements:
         Beginning Balance                                $   635,500       $   955,500         $ 635,500         $ 955,500
         Additions                                             15,000            66,667            15,000           166,667
         Maturities                                            15,000           886,667            15,000           986,667
                                                       --------------    --------------    --------------    --------------
         Ending Balance                                   $   635,500       $   135,500         $ 635,500         $ 135,500
                                                       ==============    ==============    ==============    ==============

Interest rate caps:
         Beginning Balance                                $   669,099       $   709,470         $ 670,960         $ 922,220
         Additions                                             12,250           332,500            62,250           332,500
         Maturities                                            33,640           350,000            85,501           562,750
                                                       --------------    --------------    --------------    --------------
         Ending Balance                                   $   647,709       $   691,970         $ 647,709         $ 691,970
                                                       ==============    ==============    ==============    ==============

</TABLE>

     Notional  amounts of interest  rate swaps  outstanding  have  increased  to
better match the changing mix of the Company's assets and liabilities. As market
conditions or the Company's asset/liability mix change, the Company may increase
or decrease the notional amount of swaps and caps outstanding in order to manage
the Company's interest rate risk profile.

     The  Company  manages  credit risk  arising  from  derivative  transactions
through an ongoing credit review,  approval,  and  monitoring  process.  "Credit
risk" for these derivative  transactions is defined as the risk that a loss will
occur as the result of a derivative  counterparty  defaulting on a contract when
the contract is in a favorable economic position to the Company. The Company may
enter into master netting,  market settlement,  or collateralization  agreements
with  swap  counterparties  to  reduce  the  exposure  to  credit  risk with the
individual  counterparty.  The Company  establishes  credit risk limits for each
counterparty  based on total  net  credit  exposure  to such  counterparty.  The
Company  monitors  exposure  to  counterparty  credit risk  through  sensitivity
testing.  Probable worst-case  scenarios are considered to determine the maximum
credit risk exposure for derivatives associated with a particular  counterparty.
If counterparty credit risk is determined to exceed the  pre-established  limit,
then action is taken to limit the Company's exposure with that counterparty.


<PAGE>


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.
     Beginning  in May 1999,  the  Company  was the  subject  of media  coverage
concerning   complaints  made  by  some  customers  of  the  Company's   banking
subsidiaries  regarding certain sales and collections  practices.  Following the
initial media coverage,  the San Francisco District  Attorney's office confirmed
that it had commenced an investigation  into the Company's sales and collections
practices, including the marketing of certain fee-based products and the posting
of customer payments.  The remedies available to the District  Attorney's Office
include,  but are not  limited  to,  damages,  penalties,  fines and  injunctive
relief. The Company is cooperating fully with the District  Attorney's Office in
its investigation.

     Since May 1999,  a number of lawsuits  have been filed  against the Company
and, in some cases, against certain of the Company's subsidiaries by current and
former customers of the Company's banking subsidiaries.  A consolidated putative
class action lawsuit (In re Providian Credit Card Litigation) (the "Consolidated
Action") was filed on August 3, 1999 in California  state court in San Francisco
against  the  Company,   Providian  National  Bank  ("PNB")  and  certain  other
subsidiaries,  and seeks  unspecified  damages,  including  actual and  punitive
damages, attorney's fees and injunctive relief. The complaint alleges unfair and
deceptive business  practices,  including failure to credit payments in a timely
fashion,  which resulted in the imposition of fees, adding products and charging
fees without  customer  authorization,  changing  rates and terms without proper
notice or  authorization,  and  misleading  or deceptive  sales  practices.  One
additional action pending in Alameda County,  California,  is due to be combined
with the Consolidated Action by stipulation of the parties.

     As of August 13, 1999, four similar  putative class actions were pending in
state courts and seven were pending in federal courts.  One state case was filed
in  Alameda  County,  California  and one in San  Mateo  County,  California;  a
petition  is pending to  coordinate  both these  actions  with the  Consolidated
Action.  In  addition,  one  putative  class  action  was filed in Cook  County,
Illinois.  The Company's  motion to dismiss this action is pending.  Another was
filed in Bullock  County,  Alabama  and has been  removed  to the United  States
District Court for the Middle District of Alabama.  Plaintiff's motion to remand
is pending.  The remaining  putative class actions are pending in federal courts
in the Northern  District of California,  the Eastern  District of Pennsylvania,
and the District of  Massachusetts.  These federal  actions are the subject of a
motion pending before the Judicial Panel on Multidistrict  Litigation ("MDL") to
transfer and coordinate the actions in a single  district  court. If the Alabama
action  mentioned above remains in federal court,  the Company will seek to have
it included it in the MDL proceedings.

     These  other  state and  federal  actions  contain  substantially  the same
allegations as those alleged in the Consolidated Action;  certain of the actions
also  allege  one or more of the  following:  that the  account  agreement  with
customers  contained  unconscionable  terms and fees,  that  statements  sent to
customers  failed to include  Credit  Protection  and other  add-on  fees in the
calculation of the annual percentage rate disclosed in such agreements,  refusal
to honor cancellation requests,  improper obtaining of credit reports,  breached
promises to raise credit limits,  breached  promises of high credit limits,  and
unlawful tying of Credit Protection to credit card and other products.

     A putative class action (In re Providian Securities Litigation), which is a
consolidation  of complaints  filed in the United States  District Court for the
Eastern District of New York in June 1999, alleges, in general, that the Company
and certain of its officers made false and misleading  statements concerning the
Company's  future  prospects and  financial  results in violation of the federal
securities  laws.  The  putative  class,  which is alleged to have  acquired the
Company's stock between  January 15, 1999 and May 26, 1999,  seeks damages in an
unspecified  amount,  in addition to pre-judgment  and  post-judgment  interest,
costs and attorneys fees. As of August 13, 1999, the consolidated  complaint had
not been filed.

     The investigation and actions described above are at a very early stage. No
specific  measure of damages has been demanded and, in most cases, the Company's
response is not yet due.  An  informed  assessment  of the  ultimate  outcome or
potential liability  associated with these matters is not feasible at this time.
Due to the  uncertainties  of  litigation,  there can be no  assurance  that the
Company  will  prevail on all  claims;  however,  management  believes  that the
Company has substantive defenses and intends to defend the actions vigorously.

     In addition,  the Company is commonly  subject to various other pending and
threatened  legal  actions  arising  from the  conduct  of its  normal  business
activities. In the opinion of the Company, any liability that is likely to arise
with respect to these additional actions will not have a material adverse effect
on the consolidated financial condition or results of operations of the company.

Item 4.  Submission of Matters to a Vote of Security holders.
(a)      The 1999 Annual Meeting of Stockholders was held on May 11, 1999.

(b)      The following directors were elected at such meeting:

         Christina L. Darwall
         Ruth M. Owades
         John L. Weinberg

         The  following  directors  continued  their  term of office  after such
         meeting:

         Shailesh J. Mehta          James V. Elliott
         F. Warren McFarlan         Lyle Everingham
         Larry D. Thompson          J. David Grissom

(c)      The following matters were voted upon at such meeting:

         Election of Directors              Votes For             Votes Withheld
                                            ---------             --------------
         Christina L. Darwall              124,357,848                834,551
         Ruth M. Owades                    124,333,984                858,415
         John L. Weinberg                  122,962,481               2,229,918

<TABLE>
<CAPTION>

         Item                                           Votes For            Votes Against         Abstain
                                                        ---------            -------------         -------
         <S>                                          <C>                       <C>                <C>    <C>

         Approval of an amendment to the
         Company's Certificate of Incorporation       114,856,049               9,987,311          349,039
         to increase the number of authorized
         shares of common stock


         Ratification of the selection of Ernst
         & Young LLP as independent auditors of       124,823,898                  62,072          306,429
         the Company for 1999

         No other matter was voted upon at such meeting.

</TABLE>

Item 6.  Exhibits and Reports on Form 8-K.

(a)      Exhibits Required by Item 601 of Regulation S-K.

         Exhibit 10.1  1997 Stock Option Plan UK Sub-Plan and First Amendment to
                       the Providian Financial Corporation 1997 Stock Option
                       Plan (as amended and restated June 4, 1997), adopted
                       May 11, 1999.

         Exhibit 10.2  Stock Ownership Plan UK Sub-Plan and First Amendment to
                       the Providian Financial Corporation Stock Ownership Plan
                       (as amended and restated June 23, 1998), adopted
                       May 11, 1999.

         Exhibit 10.3  1997 Employee Stock Purchase Plan UK Sub-Plan and First
                       Amendment to the Providian Financial Corporation 1997
                       Employee Stock Purchase Plan, adopted June 29, 1999.

         Exhibit 12.1  Computation of Earnings to Fixed Charges and Ratio of
                       Earning to Combined Fixed Charges and Preferred Stock
                       Dividend Requirements.

         Exhibit 27.1  Financial Data Schedule

(b)      Reports on Form 8-K.

         The Company  filed a report on Form 8-K on May 19, 1999 with respect to
         its Medium Term Note Program.

(e)      Ratio of Earnings to Fixed Charges and Ratio of Earning to Combined
         Fixed Charges and Preferred Stock Dividend Requirements

<TABLE>
<CAPTION>

                                                   Six Months
                                                      Ended
                                                     June 30                           Year Ended December 31
                                                                   -------------------------------------------------------------
(Dollars in thousands)                                 1999           1998         1997        1996         1995         1994
                                                    ----------     ----------   ----------  ----------   ----------   ----------
<S>                                                    <C>            <C>          <C>         <C>          <C>          <C>
EARNINGS TO FIXED CHARGES:
        Excluding interest on deposits                 9.47           10.88        14.20       5.93         4.90         5.17
        Including interest on deposits                 3.16            2.93         2.66       2.34         2.34         2.69
EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK: (1)
        Excluding interest on deposits                 9.47           10.88        13.28       5.19         4.32         4.40
        Including interest on deposits                 3.16            2.93         2.63       2.25         2.24         2.51

    (1) Preferred stock dividend requirements are adjusted to represent a pretax
        earnings equivalent.

</TABLE>

<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                           Providian Financial Corporation
                                           -------------------------------
                                                    (Registrant)


Date: August 16, 1999                      /s/ David J. Petrini
                                           --------------------
                                           David J. Petrini
                                           Executive Vice President and
                                           Chief Financial Officer
                                           (Principal Financial Officer and
                                           Duly Authorized Signatory)

Date: August 16, 1999                      /s/ Daniel Sanford
                                           ------------------
                                           Daniel Sanford
                                           Senior Vice President and Controller
                                           (Chief Accounting Officer and Duly
                                           Authorized Signatory)


<PAGE>


                                  EXHIBIT INDEX


Exhibit No.
-----------

Exhibit 10.1   1997 Stock  Option Plan UK Sub-Plan  and First  Amendment  to the
               Providian  Financial  Corporation  1997  Stock  Option  Plan  (as
               amended and restated June 4, 1997), adopted May 11, 1999

Exhibit 10.2   Stock  Ownership  Plan UK  Sub-Plan  and First  Amendment  to the
               Providian Financial  Corporation Stock Ownership Plan (as amended
               and restated June 23, 1998), adopted May 11, 1999

Exhibit 10.3   1997 Employee Stock Purchase Plan UK Sub-Plan and First Amendment
               to  the  Providian  Financial  Corporation  1997  Employee  Stock
               Purchase Plan, adopted June 29, 1999

Exhibit 12.1   Computation  of Ratio of Earnings  to Fixed  Charges and Ratio of
               Earnings to Combined  Fixed Charges and Preferred  Stock Dividend
               Requirements

Exhibit 27.1   Financial Data Schedule