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 March 31, 1998

                                       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 April 30,  1998,  there were  95,080,793  shares of the  registrant's
Common Stock, par value $0.01 per share, outstanding.



<PAGE>

                         PROVIDIAN FINANCIAL CORPORATION
                                    FORM 10-Q

                                      INDEX

                                 March 31, 1998


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...................10

PART II. OTHER INFORMATION

         Item 1. Legal Proceedings.......................................24

         Item 5. Other Information.......................................24

         Item 6. Exhibits and Reports on Form 8-K........................24

Signatures...............................................................25


<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements.

<TABLE>

PROVIDIAN FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
(Dollars in thousands, except per share data) (unaudited)

<CAPTION>
                                                                            March 31             December 31
                                                                              1998                   1997
                                                                         ------------           -------------
<S>                                                                                                   
Assets:                                                                  <C>                    <C>
Cash and cash equivalents                                                $    87,333            $    112,522
Federal funds sold                                                           319,890                 114,960
Investment securities at cost (which approximates market value)              270,542                 172,756
Loans held for securitization or sale                                        100,000                 450,233
Loans receivable, less allowance for credit losses of $249,440
  in 1998 and $145,312 in 1997                                             3,420,182               2,815,364
Due from securitizations                                                     476,518                 472,145
Interest receivable                                                           85,655                  80,434
Premises and equipment, net                                                   65,689                  61,625
Other assets                                                                 193,916                 169,374
                                                                         ------------           -------------      
    Total assets                                                         $ 5,019,725            $  4,449,413
                                                                         ============           =============     

Liabilities:
Deposits:                                                                $ 3,388,258            $  3,212,766
Term federal funds purchased                                                 220,000                 150,000
Notes payable to banks                                                        74,000                  82,000
Long-term notes payable                                                      199,852                     -
Accrued expenses and other liabilities                                       337,208                 249,533
                                                                         ------------           -------------      
    Total liabilities                                                      4,219,318               3,694,299

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: 400,000,000 shares; 
  issued: 1998 - 95,163,801 shares; 1997 - 95,156,545 shares                     954                     954
Additional paid-in capital                                                       -                     4,217
Retained earnings                                                            650,944                 599,856
Common stock held in treasury - at cost:
  (1998 - 261,519 shares; 1997 - 268,775 shares)                             (11,491)                 (9,913)
                                                                         ------------           -------------     
        Total shareholders' equity                                           640,407                 595,114
                                                                         ------------           -------------     
        Total liabilities and shareholders' equity                       $ 5,019,725            $  4,449,413
                                                                         ============           =============     
See notes to condensed consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>

PROVIDIAN FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data) (unaudited)

<CAPTION>
                                                                               Three Months Ended
                                                                                     March 31
                                                                      ---------------------------------------        
                                                                            1998                    1997
<S>                                                                   ---------------        ----------------         
Interest income:                                                      <C>                    <C>
   Loans                                                                 $   170,070            $    146,325
   Investment securities                                                       6,507                   5,846
                                                                         ------------           -------------             
   Total interest income                                                     176,577                 152,171

Interest expense:
   Deposits                                                                   46,153                  44,012
   Borrowings                                                                  8,603                   6,086
                                                                         ------------           -------------        
   Total interest expense                                                     54,756                  50,098

           Net interest income                                               121,821                 102,073

Provision for credit losses                                                   57,656                  33,802
                                                                         ------------           -------------          
           Net interest income after provision
           for credit losses                                                  64,165                  68,271

Non-interest income:
   Loan servicing income                                                     114,116                  93,822
   Credit product fee income                                                  96,408                  39,036
   Other                                                                         179                     139
                                                                         ------------           -------------          
                                                                             210,703                 132,997
Non-interest expenses:
   Salaries and employee benefits                                             59,734                 50,624
   Solicitation                                                               41,612                 28,123
   Occupancy, furniture and equipment                                         11,266                  8,245
   Data processing and communication                                          15,754                 11,733
   Other                                                                      53,687                 34,062
                                                                         ------------           -------------          
                                                                             182,053                132,787
                                                                         ------------           -------------          

           Income before income taxes                                         92,815                 68,481

Income tax expense                                                            36,707                 25,319
                                                                  
                                                                         ------------           -------------          

           Net Income                                                    $    56,108            $    43,162
                                                                         ============           =============          

Basic earnings per share                                                 $      0.59                  N/A
                                                                         ============           =============          
Earnings per share - assuming dilution                                   $      0.58                  N/A
                                                                         ============           =============          
Dividends paid per share                                                 $      0.05                  N/A
                                                                         ============           =============          

Weighted average common shares outstanding - basic (000)                      94,841                  N/A
                                                                         ============           =============          
Weighted average shares and assumed conversions (000)                         96,514                  N/A
                                                                         ============           =============             

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

<TABLE>

PROVIDIAN FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Shareholders' Equity
(Dollars in thousands, except per share data) (unaudited)
             

<CAPTION>

                                                7.25%                                                    Common
                                             Cumulative                 Additional                       Stock
                                              Preferred    Common        Paid-In        Retained        Held in
                                               Stock       Stock         Capital        Earnings        Treasury           Total
                                             ----------  ----------    ------------   ------------    ------------     ------------
<S>                                          <C>         <C>           <C>            <C>             <C>              <C>
                                             
Balance at December 31, 1996                 $      63   $        5    $     63,706   $    419,370    $       -        $   483,144
Net Income                                                                                  43,162                          43,162
Redemption of preferred stock                      (63)                     (63,206)                                       (63,269)
Cash dividend:                                                                                                                -
    Preferred - paid to former parent                                                       (1,006)                         (1,006)
                                             ==========  ==========    ============   =============  ============     =============
Balance at March 31, 1997                    $   -       $        5    $        500   $    461,526   $       -        $    462,031
                                             ==========  ==========    ============   =============  ============     =============

Balance at December 31, 1997                 $   -       $      954    $      4,217   $    599,856   $    (9,913)     $    595,114
Net Income                                                                                  56,108                          56,108
Cash dividend:                                                                                                                -
  Common - $0.05 per share                                                                  (4,763)                         (4,763)
Purchase of 137,200 common                                                                                                    -
  shares for treasury                                                                                     (7,654)           (7,654)
Exercise of stock options                                                    (1,623)          (257)        2,692               812
Issuance of restricted and                                                                                                    -
      unrestricted stock less                                                                                                 -
      forfeited shares                                                        1,401                        3,384             4,785
Deferred compensation related to                                                                                              -
      grant of restricted and unrestricted                                                                                    -
      stock less amortization of $837                                        (3,948)                                        (3,948)
Net tax effect from exercise of stock options                                                                                 -
    and issuance of restricted stock                                            (47)                                           (47)
                                             ==========  ==========    =============  =============  ============     =============
Balance at March 31, 1998                    $   -       $      954    $       -      $    650,944   $   (11,491)     $    640,407
                                             ==========  ==========    ============   =============  ============     ============

See notes to condensed consolidated financial statements.

</TABLE>

<PAGE>

<TABLE>

PROVIDIAN FINANCIAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands) (unaudited)

<CAPTION>
                                                                                                   Three Months Ended
                                                                                                        March 31
                                                                                            ----------------------------------------
                                                                                                  1998                      1997
                                                                                            ---------------             ------------
<S>                                                                                         <C>                         <C>    

Operating Activities:
    Net Income                                                                              $      56,108             $      43,162
    Adjustments to reconcile net income to net cash provided by operating activities:
      Provision for credit losses                                                                  57,656                    33,802
      Depreciation and amortization of premises and equipment                                       4,131                     3,539
      Amortization of net loan acquisition costs                                                    9,776                     7,467
      Amortization of discount on sale of loans receivable                                            130                       126
      Amortization of deferred compensation
        related to restricted and unrestricted stock                                                  837                      -
      (Increase) decrease in deferred income tax benefit                                          (12,544)                   7,847
      Increase in interest receivable                                                              (5,221)                    (610)
      Increase in other assets                                                                    (21,170)                 (15,264)
      Increase in accrued expenses and other liabilities                                           89,803                    9,230
                                                                                            ---------------           --------------
                             Net Cash Provided by Operating Activities                            179,506                   89,299

Investing Activities:
      Net increase in money market instrument investments                                         (99,937)                (199,895)
      Net cash used for loan originations and principal
        collections on loans receivable                                                          (133,779)                 (40,841)
      Net proceeds from securitization of loans                                                   769,870                1,024,960
      Portfolio acquisitions                                                                     (948,462)                    -
      Increase in due from securitizations                                                         (4,373)                (184,666)
      Purchases of investment securities                                                              (24)                (220,348)
      Proceeds from maturities of  investment securities                                             -                     219,660
      Increase in federal funds sold                                                             (204,930)                (418,970)
      Net purchases of premises and equipment                                                      (8,195)                  (8,032)
                                                                                            ---------------           --------------
                             Net Cash (Used) Provided by Investing Activities                    (629,830)                 171,868

Financing Activities:
      Net increase (decrease) in deposits                                                         175,492                 (397,589)
      Proceeds from issuance of term federal funds                                                250,000                  204,000
      Repayment of term federal funds                                                            (180,000)                 (25,000)
      Decrease in notes payable to banks                                                           (8,000)                  (5,000)
      Decrease in note payable to affiliates                                                         -                     (42,500)
      Increase in long-term notes payable                                                         199,852                     -
      Proceeds from the issuance of capital securities                                               -                     160,000
      Redemption of preferred stock                                                                  -                     (63,269)
      Purchase of treasury stock                                                                   (7,654)                    -
      Dividends paid                                                                               (4,763)                  (1,006)
      Proceeds from exercise of stock options                                                         208                     -
                                                                                            ---------------           --------------
                             Net Cash Provided (Used) by Financing Activities                     425,135                 (170,364)
                                                                                            ---------------           --------------

Net (Decrease) Increase in Cash and Cash Equivalents                                              (25,189)                  90,803
Cash and Cash Equivalents at beginning of year                                                    112,522                   82,946
                                                                                            ---------------           --------------
Cash and Cash Equivalents at end of period                                                  $      87,333             $    173,749
                                                                                            ===============           ==============

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

<PAGE>


PROVIDIAN FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements
March 31, 1998  (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  fee-based  products.  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 months ended
March 31, 1998 are not necessarily  indicative of the results for the year ended
December  31,  1998.  The notes to the  financial  statements  contained  in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 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 1998 presentation.

Note 2 - Significant Accounting Policies

     Effective  January 1, 1998,  the Company  adopted  Statement  of  Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130").
SFAS No. 130  establishes  standards for reporting and display of  comprehensive
income and its components (revenues, expense, gains and losses) in the financial
statements.  The  adoption  of SFAS No.  130 has had no  material  effect on the
Company's consolidated results of operations, financial position or cash flows.

Note 3 - Earnings Per Share

     Historical earnings per share for the quarter ending March 31, 1997 are not
presented because prior to June 10, 1997, when the Company was spun off from its
former  parent,  Providian  Corporation  (the  "Spinoff"),  all of the shares of
common stock of the Company were held by its former parent, and such information
would not be meaningful. Pro forma earnings per share, with and without dilution
for the quarter ended March 31, 1997,  have been computed by dividing net income
reported  for the  period by the pro  forma  weighted  average  number of common
shares outstanding for the applicable period.

     The pro forma number of common shares  outstanding prior to the Spinoff was
determined on the basis of the number of shares of Providian  Corporation common
stock then outstanding, since shareholders of Providian Corporation received one
share of the  Company's  common  stock for each share of  Providian  Corporation
common  stock  held  on  the  record  date  for  the  Spinoff.  Included  in the
computation  of fully  diluted  common shares prior to the Spinoff are Providian
Corporation  options which were exercised  between  January 1, 1997 and June 10,
1997. These options have been included because,  when they were exercised,  they
became eligible to be converted to the Company's common stock in connection with
the Spinoff.
<PAGE>

                                                            March 31
 (In thousands, except per share data)               1998            1997 (1)
 ----------------------------------------------------------------------------
                               
 Income available to common stockholders           $56,108           $43,162
                                             ================= ==============   

 Weighted average shares outstanding--Basic         94,841            94,164
 Effect of dilutive securities
   Restricted Stock issued--non vested                 335              -
   Employee stock options                            1,338               394
                                             ----------------- --------------   
 Dilutive potential common shares                    1,673               394
                                             ================= ==============   
 Adjusted weighted average shares and assumed
   conversions                                      96,514            94,558
                                            ================= ===============  

Earnings per share                                  $0.59             $0.46
                                            ================= ===============  

Earnings per share--assuming dilution               $0.58             $0.46
                                            ================= ===============  

(1) Earnings  per share for the three months ended March 31, 1997 are  presented
on a pro forma basis.  For purposes of pro forma earnings per share,  net income
has not been  adjusted  dividends  on  preferred  stock,  which was  redeemed in
February  1997 out of  proceeds  from the  issuance  of  mandatorily  redeemable
capital securities.

Note 4 - Loan Portfolio Acquisition and Allowance for Credit Losses

     During the first quarter, the Company completed its purchase of a portfolio
of  unsecured  credit  card loans from First Union  Direct  Bank,  N.A.  ("First
Union") for approximately $948 million in cash (the "Portfolio Acquisition"). In
addition,  on May 1, 1998,  the Company  purchased  an  additional  portfolio of
credit  card loans  from First  Union for  approximately  $974  million in cash,
subject  to  certain  post-closing  adjustments.  These two  portfolios  include
approximately  1,050,000 account  relationships,  records and other rights.  The
Company did not, and does not plan to,  acquire any fixed assets or employees of
First Union in connection with the acquisition of these portfolios.  The Company
records the  allowance  for credit  losses for  acquired  loan  portfolios  upon
purchase to reflect the credit quality and expected  collectibility of the loans
included in the acquisition.

     The activity in the  allowance  for credit  losses for the  quarters  ended
March 31, 1998 and 1997 is as follows (in thousands):

                                                            March 31
                                                     1998             1997
 ---------------------------------------------------------------------------
 Balance at beginning of period                   $145,312          $114,540
 Provision for credit losses                        57,656            33,802
 Reserve acquired                                  105,367              -
 Charge-offs                                       (64,420)          (30,591)
 Recoveries                                          5,525             1,507
                                           ------------------------------------
 Net charge-offs                                   (58,895)          (29,084)
                                           ====================================
 Balance at end of period                         $249,440          $119,258
                                           ====================================

<PAGE>

Note 5 - Senior and Subordinated Bank Notes

     In February  1998,  one of the Company's  banking  subsidiaries,  Providian
National  Bank  ("PNB"),  established  a program for the  issuance of senior and
subordinated  debt  instruments  to  further  diversify  its  available  funding
sources.  Under this program,  PNB from time to time may issue fixed or variable
rate debt  instruments  in the aggregate  principal  amount of up to $4 billion,
with  maturities  ranging from seven days to 15 years.  During the quarter ended
March 31, 1998, PNB issued $200 million in principal amount of long-term notes.

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

Introduction

     Providian Financial Corporation is a diversified consumer lender,  offering
a range of lending products,  including unsecured credit cards,  revolving lines
of credit, home loans, secured and partially secured credit cards, and fee-based
products,  primarily  through  direct  mail  and  direct  telemarketing  account
origination  channels.  Through  these  products,  the Company  seeks to achieve
diversified  earnings sources,  with both spread-based and fee-based income from
loans and related products and services. The foregoing products include unbanked
products ("Unbanked  Products") offered by the Company,  primarily consisting of
secured and partially  secured  credit cards and certain  unsecured  credit card
products which are designed to serve a population that the Company  believes has
been largely underserved by traditional financial institutions. The Company also
offers deposit products to customers  nationwide.  The primary factors affecting
the profitability of the Company's  consumer products are the number of customer
accounts and  outstanding  loan balances,  net interest  margins,  credit usage,
level of fee income,  credit quality,  and the level of solicitation  servicing,
and other expenses.

Forward-Looking Statements

     Certain  statements  contained herein include  forward-looking  information
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  the  "belief,"  "anticipation"  or  "expectations"  of
management,  statements  as  to  industry  trends  or as to  future  results  of
operations of the Company,  and other  statements which are not historical fact.
Undue   reliance   should   not  be   placed  on   forward-looking   statements.
Forward-looking   statements   are  not   guarantees   of  future   performance.
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,  outside vendor  relationships,  funding costs and  availability,
general  economic  conditions,  government  policy  and  regulations,  and risks
related to growth, product development,  acquisitions and operations.  These and
other risks and  uncertainties are described in the Company's 1997 Annual Report
on Form 10-K under the heading  "Cautionary  Statements." The Company undertakes
no obligation  to update any  forward-looking  statements  to reflect  events or
circumstances after the date hereof.

Earnings Summary

     Net income for the quarter ended March 31, 1998 was $56.1 million, or $0.58
per  share,  compared  to net  income of $43.2  million,  or $0.46 pro forma per
share,  for the  quarter  ended  March  31,  1997.  As  stated  in Note 3 to the
Company's condensed consolidated financial statements,  the Company's historical
earnings  per share have not been  presented  for  periods  prior to the quarter
ended June 30, 1997 because prior to June 10, 1997 all of the  Company's  common
stock was held by its former parent, Providian Corporation, and such information
would not be meaningful.

     The overall growth in earnings for the quarter is primarily attributable to
growth in managed loans  outstanding,  higher net interest margins and increased
non-interest   income,   offset  by  higher  net  credit  losses  and  increased
non-interest  expenses.  Average managed loans  outstanding  increased from $9.2
billion  for the quarter  ended March 31, 1997 to $10.5  billion for the quarter
ended March 31, 1998, reflecting the impact of marketing and customer activation
efforts  combined with the Portfolio  Acquisition.  End of period  managed loans
receivable  increased from $9.1 billion as of March 31, 1997 to $10.7 billion as
of March 31, 1998.  On-balance sheet loans also increased year over year to $3.8
billion as of March 31, 1998, compared to $2.7 billion as of March 31, 1997.
<PAGE>

     From December 31, 1997 to March 31, 1998,  total managed loans  outstanding
increased  from  $9.9  billion  to $10.7  billion,  reflecting  limited  balance
attrition offset by the loans acquired in the Portfolio  Acquisition.  Including
the accounts in the  Portfolio  Acquisition,  the Company  added 1.1 million new
customer  accounts  during the three  months  ended  March 31,  1998.  These new
accounts added to the Company's  customer base for fee-based  product sales.  On
May 1, 1998, the Company  purchased an additional  portfolio of unsecured credit
card receivables and related accounts from First Union.
     
     Return on average total managed assets for the three months ended March 31,
1998 was 1.84%,  compared to 1.69% for the same period during 1997.  This higher
return is primarily the result of higher net interest  margins  driven by growth
in the  number of  Unbanked  Product  accounts  as well as  increased  fee-based
product and other fee  income.  Return on average  shareholders'  equity for the
three  months  ended March 31, 1998 was 36.14%,  compared to 35.34% for the same
period in 1997,  reflecting the increased return on average total managed assets
for the period,  offset by a higher ratio of average  equity to average  managed
assets.

Managed Loan Portfolio

     The  Company's  consumer  loan  products  include  unsecured  credit cards,
revolving lines of credit,  home loans, and secured and partially secured credit
cards.  Since  1989,  the  Company  has  securitized  unsecured  credit card and
revolving  lines of credit and,  beginning in 1996, home equity lines of credit.
During the quarter  ended March 31, 1998,  the Company  securitized  secured and
partially secured credit card receivables for the first time.  Securitized loans
are not  considered  assets of the  Company and  therefore  are not shown on its
statement of financial  condition.  It is,  however,  the Company's  practice to
analyze its financial  performance on a managed loans basis.  In order to do so,
the Company's income statement and statement of financial condition are adjusted
to reverse the effect of securitization.

     In June 1996, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities"  ("SFAS No.125"),  which
provided new accounting  and reporting  standards for  securitization  and other
similar transactions, effective January 1, 1997. Under SFAS No. 125, the Company
recognizes an "interest only strip receivable" asset,  available for sale, equal
to the present value of the projected excess servicing income of the transferred
assets.

     The following  table  summarizes  selected  data on the  Company's  managed
consumer loan portfolio:

 <TABLE>
--------------------------------------------------------------------------------
              TABLE 1 - MANAGED CONSUMER LOAN PORTFOLIO INFORMATION
--------------------------------------------------------------------------------

<CAPTION>

                                                          Three Months Ended
                                                               March 31
                                                 -------------------------------
(Dollars in thousands)                               1998                 1997
                                                 --------------      -----------
<S>                                              <C>                 <C>

Period-End Balances:
On-balance sheet consumer loans                  $    3,769,622      $ 2,676,305
Securitized consumer loans                            6,886,014        6,397,460
                                                 --------------      -----------
 Total managed consumer loan portfolio           $   10,655,636      $ 9,073,765
                                                 ==============      ===========

Average Balances:
On-balance sheet consumer loans                  $    3,980,578      $ 3,527,729
Securitized consumer loans                            6,558,094        5,626,157
                                                 --------------      -----------      
 Total average managed consumer loan portfolio   $   10,538,672      $ 9,153,886
                                                 ==============      ===========

Operating Data and Ratios:
Reported:
       Average earning assets                    $    4,437,060      $ 3,976,327
       Return on average assets                           4.35%            3.85%
       Net interest margin (1)                           10.98%           10.27%
Managed:
       Average earning assets                    $   10,995,154      $ 9,602,484
       Return on average assets                           1.84%            1.69%
       Net interest margin (1)                           10.55%           10.12%

(1) Net interest margin is equal to net interest income divided by
    average earning assets.
</TABLE>
<PAGE>

     The Company  services the accounts  underlying  the  securitized  loans and
earns a stated monthly servicing fee, which is generally offset by the servicing
costs incurred by the Company.  The finance charge and fee revenue  generated by
the securitized  loans, in excess of interest paid to investors,  related credit
losses,  servicing fee, credit enhancement costs and other program expenses,  is
referred to as excess servicing income.  Revenue resulting from excess servicing
income is recognized  first as a reduction of the interest only strip receivable
and, to the extent the amount  received  exceeds the  related  component  of the
interest only strip  receivable  (which was recorded at present value),  as loan
servicing income.  The effect of this 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 March 31, 1998 and
1997,  as a result of  securitization,  the  Company's  net interest  income was
reduced by $168.2 million and $140.9  million,  respectively;  the provision for
credit losses was reduced by $119.6  million and $109.5  million,  respectively;
and  non-interest  income was  increased  by $48.6  million  and $31.4  million,
respectively.

Net Interest Income

     Net  interest  income  represents  the interest  earned from the  Company's
on-balance  sheet consumer loans less the related  interest  expense  related to
deposits and borrowings. As a result of the Company's securitization of consumer
loans, the volume of on-balance  sheet loans,  deposits and borrowings will vary
over time.

     Net interest  income for the first quarter of 1998 totaled $121.8  million,
compared  to $102.1  million  for the same  period  of 1997.  This  increase  is
primarily  attributable  to  higher  average  on-balance  sheet  consumer  loans
combined with higher net interest  margins.  Interest expense as a percentage of
average  interest-bearing  assets declined 10 basis points for the first quarter
of 1998  compared to the first  quarter of 1997.  The  annualized  net  interest
margin on  average  earning  assets for the first  quarter  of 1998 was  10.98%,
compared to 10.27% for the same period in the prior year.

     On a managed loan basis,  managed net interest income for the quarter ended
March 31, 1998 was $290.1 million,  compared to $243 million for the same period
in 1997, an increase of $47.1 million, or 19.4%. The managed net interest margin
on average  managed  loans  increased to 11.09% for the quarter  ended March 31,
1998,  from 10.47% for the quarter  ended March 31,  1997.  These  increases  in
managed net interest  income and the managed net income margin  resulted from an
increase in average  managed  loans as well as higher  finance  charge yields on
selected portfolio segments that were repriced in the prior year.

Statement of Average Balances, Income and Expense, Yields and Rates

     The  following  table  provides an analysis  of interest  income,  interest
expense,  net interest margin and average balance sheet data for the three month
periods  ended March 31, 1998 and 1997, as prepared  from  historical  financial
information:
<PAGE>

<TABLE>

--------------------------------------------------------------------------------------------------------------------
                      TABLE 2 - STATEMENTS OF AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
--------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                            Three Months Ended March 31
                                     -------------------------------------------------------------------------------
                                                   1998                                  1997
                                     ------------------------------------- -----------------------------------------
(Dollars in thousands)                   Average       Income/      Yield/     Average       Income/         Yield/
                                         Balance       Expense      Rate       Balance       Expense          Rate
                                     -------------  ------------  --------  -------------   ------------   ---------
<S>                                  <C>            <C>           <C>       <C>             <C>            <C> 

Assets 
Interest-earning assets
    Consumer loans                   $ 3,980,578    $  170,070    17.09%    $  3,527,729    $   146,325      16.59%
    Interest-earning cash                 40,963           556     5.43%          99,478          1,289       5.18%
    Federal funds sold                   211,429         2,904     5.49%         309,800          4,061       5.24%
    Investment securities                204,090         3,047     5.97%          39,320            496       5.05%
                                     -------------  ------------  --------  -------------   ------------   ---------
Total interest-earning assets          4,437,060    $  176,577    15.92%       3,976,327    $   152,171      15.31%

Allowance for loan losses               (227,560)                               (116,841)
Other assets                             948,937                                 626,638
                                     -------------                          -------------
Total assets                         $  5,158,437                           $  4,486,124
                                     =============                          =============
 

Liabilities and Equity
Interest-bearing liabilities
    Deposits                         $  3,425,203   $   46,153     5.39%    $  3,258,540    $    44,012       5.40%
    Borrowings                            587,279        8,603     5.86%         400,995          6,086       6.07%
                                     -------------  ------------  --------  -------------   ------------   ---------
Total interest-bearing liabilities      4,012,482   $   54,756     5.46%       3,659,535    $    50,098       5.48%

Other liabilities                         365,405                                238,307
                                     -------------                          -------------
Total liabilities                       4,377,887                              3,897,842

Capital securities                        160,000                                 99,555

Equity                                    620,550                                488,727
                                     -------------                          -------------
Total liabilities and equity         $  5,158,437                           $  4,486,124
                                     =============                          =============

Net Interest Spread                                               10.46%                                      9.83%
                                                                  ========                                 =========

Interest income to average
    interest-earning assets                                       15.92%                                     15.31%
Interest expense to average
    interest-earning assets                                        4.94%                                      5.04%
                                                                  --------                                 ---------
Net interest margin                                               10.98%                                     10.27%
                                                                  ========                                 =========

</TABLE>

Interest Volume and Rate Variance Analysis

     Net  interest  income is affected by changes in the average  interest  rate
earned  on   interest-earning   assets,   the  average  interest  rate  paid  on
interest-bearing  liabilities  and by changes in the volume of  interest-earning
assets and  interest-bearing  liabilities.  The  quarter  ended  March 31,  1998
compared  to the  prior  year  quarter  reflects  growth in  consumer  loans and
investment  securities,  which was partially offset by increased  securitization
activity in the first  quarter of 1998,  resulting  in higher  on-balance  sheet
earning assets. Increasing yields on loans combined with slightly lower rates on
deposits  and  borrowings  increased  the rate of net interest  income  realized
during the quarter  ended March 31, 1998  compared to the same  quarter of 1997.
The following  table sets forth the dollar amount of the increase  (decrease) in
interest income and interest expense resulting from changes in the volume, rates
and interest income:
<PAGE>

--------------------------------------------------------------------------------
                      TABLE 3 - INTEREST VARIANCE ANALYSIS
--------------------------------------------------------------------------------

                                            Three Months Ended March 31
                                                  1998 vs. 1997
                                  ----------------------------------------------
                                     Increase
(Dollars in thousands)              (Decrease)        Volume           Rate
                                  ---------------   -----------      ---------

Interest Income:
Consumer loans                    $ 23,745          $ 19,230         $ 4,515
Federal funds sold                  (1,157)           (2,352)          1,195
Other securities                     1,818             1,307             511
                                  ---------------   -----------      ----------
    Total interest income           24,406            18,185           6,221

Interest Expense:
Deposits                             2,141             2,695            (554)
Borrowings                           2,517             3,910          (1,393)
                                  ---------------   -----------      ----------
    Total interest expense           4,658             6,605          (1,947)
                                  ---------------   -----------      ----------
    Net interest income           $ 19,748          $ 11,580         $ 8,168
                                  ===============   ===========      ==========

(1)  The change in interest  due to both volume and rate has been  allocated  in
     proportion to the relationship of the absolute dollar amounts of the change
     in each. The changes in income and expense are calculated independently for
     each line in the table.

Non-Interest Income

     Non-interest income, which consists primarily of loan servicing income, fee
income from credit  products and other  fee-based  product  income,  represented
approximately  54% of gross on-balance sheet revenues for the three months ended
March 31, 1998,  compared to approximately  47% for the three months ended March
31, 1997.  The higher  non-interest  income  resulted from higher loan servicing
income,  due primarily to higher average  securitized assets and increased sales
of fee-based products.

Loan Servicing Income

     Average  securitized  loans,  which are  reduced by  principal  collections
accumulated in principal  funding accounts prior to being paid to securitization
investors,  were $6.6  billion  during the three  months  ended March 31,  1998,
compared  to $5.6  billion  for the same period of 1997,  a 18%  increase.  Loan
servicing income  increased 22%, to $114.1 million,  for the quarter ended March
31, 1998, compared to $93.8 million for the same period in 1997. The increase in
loan servicing  income  resulted from improved net interest  margins,  offset in
part by moderate  increases in credit loss rates, on higher average  securitized
loans.  Further  offsetting the increase in loan servicing income was a decrease
in the gain on sale of assets recognized  pursuant to SFAS No. 125, which became
effective  January 1, 1997.  Gains recorded upon  securitization,  recognized in
accordance  with SFAS No. 125,  were $2.8 million and $34.2  million  during the
three months ended March 31, 1998 and 1997, respectively.  The decrease reflects
the impact of SFAS No. 125 during the first  quarter of 1997,  when the  Company
was required to recognize both excess  servicing income generated by securitized
balances  existing at December 31, 1996 and gains on additional  loan sales made
during that quarter.  The Company recognizes gains from such loan sales as "loan
servicing  income"  on its  statement  of  income  and the  related  asset  as a
component of "due from securitizations" on its statement of financial condition.
Any future gains that will be recognized by the Company in accordance  with SFAS
No.  125  will  depend  on  the  timing,   performance   and  amount  of  future
securitizations.

Credit Product Fee Income

     Credit product fee income totaled $96.4 million for the quarter ended March
31,  1998,  compared  to $39.0  million  for the prior year  quarter.  This 147%
increase  resulted from increased  credit card  membership and processing  fees,
increased income from sales of the Company's  fee-based products and an increase
in late, overlimit and cash advance fees.
<PAGE>

Non-Interest Expense

     Non-interest  expense for the three  months ended March 31, 1998 was $182.1
million, an increase of 37% over non-interest  expense of $132.8 million for the
same period in the prior year.  Salaries and employee  benefits  increased  $9.1
million,  or 18%, to $59.7  million for the three  months  ended March 31, 1997,
compared to $50.6  million for the same period in the prior year.  This increase
reflects an increase in the employee base to support  increased  customer volume
and additional account  acquisition  efforts.  Solicitation costs, which include
direct  mail,  postage,  telemarketing  and package  materials  for both new and
existing customers totaled $41.6 million for the quarter ended March 31, 1997, a
48% increase over the prior year quarter total of $28.1  million.  This increase
in solicitation  costs resulted from an increased  investment in the direct mail
and  direct  telemarketing  acquisition  channels  and  from  other  initiatives
designed to improve customer activation and retention.

     Some of the Company's  older computer  programs and certain vendor programs
were written using two digits rather than four to define the applicable year. As
a result,  the Company  launched a Year 2000 project to identify  the  programs,
assess the  associated  risk and modify the computer  programs  written with two
digit date formats.  The Company has  completed  its  assessment of internal and
vendor computer programs. Program modification and testing is currently underway
and is estimated for  completion by June 1999. The total Year 2000 project costs
are being expensed as incurred and are not expected to have a material impact on
the Company's future financial results or condition.

Income Taxes

     The  Company's  income tax expense,  which  includes both state and federal
taxes, was $36.7 million for the three months ended March 31, 1998,  compared to
$25.3  million for the three months ended March 31,  1997.  The overall  current
effective  income  tax rate of 39.5%  reflects  an  increase  in state tax rates
associated with the Spinoff.

Asset Quality

     Delinquencies and net credit losses  experienced in the Company's  consumer
loan  portfolio  reflect,  among  other  factors,  the  creditworthiness  of the
borrowers,  the average age of accounts  (generally referred to as "seasoning"),
the success of the Company's collection efforts and general economic conditions.

     The  establishment of the allowance for credit losses generally  depends on
historical  levels of credit losses and current  trends.  As new  portfolios are
originated,  management uses historical credit loss and delinquency  analyses to
establish  reserves for future credit losses,  based on the  aggregation of loss
behavior of similar but more seasoned loan portfolios.  The allowance for credit
losses related to acquired loan  portfolios is recorded upon purchase to reflect
the credit  quality and  expected  collectibility  of the loans  included in the
acquisition.

     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 180 days  delinquent,  with the  exception of bankrupt
accounts and accounts of deceased customers,  both of which are charged-off upon
determination of collectibility. Home loans are reviewed for collectibility when
they become 60 days delinquent,  and credit losses are recognized for the amount
by which the book value of the loan exceeds the estimated net  realizable  value
of the  underlying  collateral.  The Company  continues to pursue  collection of
charged-off  loans when appropriate,  and subsequent  collections on charged-off
loans are recognized as recoveries.

Delinquencies

     An account is considered  delinquent if the minimum payment is not received
by the next  billing  date.  Interest  and fee income  continue  to accrue on an
account after the account becomes delinquent (unless the customer is bankrupt or
is deceased) until the loan is either repaid or recognized as a credit loss. The
following table presents delinquency information as of March 31, 1998 and 1997:
<PAGE>

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------
                                        TABLE 4 - DELINQUENCIES
------------------------------------------------------------------------------------------------------------------

                                                                March 31
                                ----------------------------------------------------------------------------------
                                                  1998                                         1997
                                --------------------------------------          ----------------------------------
                                                             % of                                        % of
                                                             Total                                       Total
(Dollars in thousands)               Loans                   Loans                   Loans               Loans
<S>                             <C>                     <C>                     <C>                  <C>    
                                -----------------       --------------          -----------------    --------------
Reported: (1)
Loans outstanding               $    3,769,622              100.00%             $   2,676,305            100.00%
Loans delinquent:
    31 - 60 days                        68,269                1.81%                    48,070             1.80%
    61 - 90 days                        44,136                1.17%                    26,003             0.97%
    91 or more days                     87,896                2.33%                    56,076             2.09%
                                -----------------       --------------          -----------------    --------------
    Total                       $      200,301                5.31%             $     130,149             4.86%
                                =================       ==============          =================    ==============
Managed:
Loans outstanding                   $ 10,655,636            100.00%             $   9,073,765           100.00%
Loans delinquent:
    31 - 60 days                         171,204              1.60%                   154,535             1.70%
    61 - 90 days                         109,370              1.03%                    86,264             0.95%
    91 or more days                      210,651              1.98%                   169,070             1.87%
                                -----------------       --------------          -----------------    --------------
    Total                              $ 491,225              4.61%             $     409,869             4.52%
                                =================       ==============          =================    ==============

(1) Includes loans held for securitization.
</TABLE>


     The managed loan delinquency rate as of March 31, 1998 was 4.61%,  compared
to 4.22% as of December 31, 1997 and 4.52% as of March 31, 1997. The increase in
the managed loan  delinquency  rate over the prior  quarter  reflects the higher
rates  of  delinquency  associated  with the  loans  acquired  in the  Portfolio
Acquisition.  Excluding the effect of the Portfolio Acquisition, the delinquency
rate at March 31,  1998 would  have been  4.22% pro forma,  level with the prior
quarter.  The delinquency  rate for on-balance sheet loans was 5.31% as of March
31,  1998,  compared to 4.17% as of December  31, 1997 and 4.86% as of March 31,
1997. This increase in the on-balance  sheet loan  delinquency rate reflects the
effect of the loans acquired in the Portfolio  Acquisition,  which have not been
securitized, and the Company's Unbanked Product outstandings, which experience a
higher  delinquency  rate than the Company's  other credit card loans.  Unbanked
Products  consisting of secured and partially  secured credit card  outstandings
are  collateralized  in whole or in part by  customer  savings  accounts,  which
mitigate  the  increased  risk  associated  with higher  delinquencies.

Net Credit Losses

     Net credit losses for consumer  loans  consist of the  principal  amount of
charge-offs  on loans to customers who are unwilling or unable to pay their loan
balances,  including  bankrupt  and  deceased  customers,  less  current  period
recoveries on previously charged-off accounts. Net credit losses exclude accrued
interest and fee income, which are written off as a reversal of current earnings
at the time of credit loss  recognition.  Losses from  fraudulent  activity  are
included in non-interest expenses.

     The following  table  presents the Company's net credit losses for consumer
loans for the three month periods ended March 31, 1998 and 1997:
<PAGE>

        
--------------------------------------------------------------------------------
                           TABLE 5 - NET CREDIT LOSSES
--------------------------------------------------------------------------------

                                                    Three Months Ended March 31
(Dollars in thousands)                                 1998              1997
                                                 -----------------   -----------

Reported: (1)
Average loans outstanding                        $ 3,980,578         $ 3,527,729
Net charge-offs                                  $    58,895         $    29,084
Net charge-offs as a percentage
   of average loans outstanding                        5.92%               3.30%

Managed:
Average loans outstanding                        $ 10,538,672        $ 9,153,886
Net charge-offs                                  $    178,518        $   138,601
Net charge-offs as a percentage
   of average loans outstanding                         6.78               6.06%

(1) Includes loans held for securitization.


     The managed net credit loss rate for the three  months ended March 31, 1998
was 6.78%,  compared to 6.42% for the quarter ended  December 31, 1997 and 6.06%
for the quarter  ended  March 31,  1997.  The  increase  over the prior  quarter
reflects  the higher  credit loss rates on the loans  acquired in the  Portfolio
Acquisition  and  account  seasoning.  Excluding  the  impact  of the  Portfolio
Acquisition,  the credit  loss rate for the  quarter  ended March 31, 1998 would
have  been  6.49% pro  forma,  a modest  increase  over the  prior  quarter  and
reflective of the industry wide trend in consumer  credit  performance  over the
prior year quarter.

Allowance and Provision for Possible Credit Losses

     The  Company  maintains  the  allowance  for  credit  losses  at a level it
believes to be adequate  to absorb  future  credit  losses,  net of  recoveries,
inherent in the existing on-balance sheet portfolio.  In evaluating the adequacy
of the allowance, management takes into consideration several factors, including
general economic conditions,  asset quality,  seasoning,  security and trends in
credit losses and delinquencies.

The following table sets forth the activity in the allowance for possible credit
losses for the three months ended March 31, 1998 and 1997:
<TABLE>
----------------------------------------------------------------------------------------------------   
                           TABLE 6 - SUMMARY OF ALLOWANCE FOR CREDIT LOSSES
----------------------------------------------------------------------------------------------------   

<CAPTION>


                                                                       Three Months Ended March 31
                                                               -------------------------------------    
(Dollars in thousands)                                               1998                   1997
                                                               -----------------      --------------   
<S>                                                            <C>                    <C>
Balance at beginning of period                                        $ 145,312          $ 114,540
Provision for credit  losses                                             57,656             33,802                                
Reserve acquired                                                        105,367               -
Charge-offs                                                             (64,420)           (30,591)
Recoveries                                                                5,525              1,507
                                                               -----------------      --------------   
Net charge-offs                                                         (58,895)           (29,084)
                                                               -----------------      --------------   
Balance at end of period                                              $ 249,440          $ 119,258
                                                               =================      ==============   

Allowance for credit losses to loans at period-end (1)                    6.80%               4.46%

(1) Excludes loans held for securitization.
</TABLE>


Funding, Liquidity and Market Risk

     The  Company's  approach  to funding  its  assets is to seek a  diversified
funding mix and investor  base.  Funding  products  used by the Company  include
direct and brokered  retail and  institutional  deposits,  term  federal  funds,
public and private securitizations,  a committed revolving credit facility, long
term notes and mandatorily redeemable capital securities. Within funding product
categories,  funding  sources are  further  diversified  based on the  industry,
geographical location and type of investor.  The Company currently offers a wide
range of maturity terms for its funding  products ranging from one week to seven
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.
Management's goal is to achieve a balanced distribution of maturities,  avoiding
undue concentration in any one period. Management also monitors existing funding
maturities and seeks to ensure that appropriate  amounts of backup liquidity are
available to support maturing funding sources.

The following  table  summarizes  the  contractual  maturities of deposits as of
March 31, 1998:
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
                                           TABLE 7 - CONTRACTUAL MATURITIES OF DEPOSIT
-----------------------------------------------------------------------------------------------------------------------------------

                                                        March 31, 1998                                March 31, 1997
                                          --------------------------------------------  -------------------------------------------
(Dollars in thousands)                            Direct         Other          Total           Direct         Other         Total
                                                Deposits      Deposits       Deposits         Deposits      Deposits      Deposits
<S>                                       <C>                <C>          <C>         <C>                <C>          <C> 
                                          --------------------------------------------  -------------------------------------------
Three months or less                         $   329,269     $ 117,726    $   446,995   $      403,220     $ 404,286    $  807,506
Over three months through 12 months              642,500       218,602        861,102          552,950       180,119       733,069
Over one year through five years                 534,545       578,904      1,113,449          308,389       304,733       613,122
Deposits without contractual maturity            897,721        68,991        966,712          779,472        59,355       838,827
                                          --------------------------------------------  -------------------------------------------
     Total Deposits                          $ 2,404,035     $ 984,223    $ 3,388,258   $    2,044,031     $ 948,493    $2,992,524
                                          ============================================  ===========================================
</TABLE>

     Deposits  increased  from $3.2  billion  as of  December  31,  1997 to $3.4
billion as of March 31, 1998. This increase resulted from  management's  efforts
to  increase  deposits  to  provide  funding  for  on-balance  sheet  loans  and
short-term investments used in liquidity management.

     Interest  expense on  borrowings  for the quarter  ended March 31, 1998 was
$8.6  million,  compared to $6.1  million for the quarter  ended March 31, 1997.
This  increase  was the result of higher  average  borrowings  of federal  funds
purchased and notes payable to banks.

     The Company  maintains a $1.2 billion  committed  revolving credit facility
from a syndicate  of domestic  and  international  banks,  which is scheduled to
expire in May 1999. Borrowings under this credit facility are available to three
of the Company's  subsidiaries,  Providian  National  Bank,  Providian  Bank and
Providian  Credit  Corporation  (the  "Borrowers"),  and the credit  facility is
guaranteed by Providian Financial Corporation. As of March 31, 1998, outstanding
borrowings under the credit facility totaled $74 million. Among other covenants,
the credit  facility  contains  certain  financial  covenants  applicable to the
Company, including consolidated asset return and capital requirements and a loan
delinquency  test.  In  addition,  certain  financial  ratios are required to be
maintained by each of the Borrowers.  The unused  commitment is available to the
Borrowers as funding needs may arise.

     In February 1998, Providian National Bank ("PNB") established a program for
the issuance of senior and subordinated  debt  instruments to further  diversify
funding  sources.  Under this program,  PNB from time to time may issue fixed or
variable rate debt  instruments  in the aggregate  principal  amount of up to $4
billion, with maturities ranging from seven days to 15 years. During the quarter
ended March 31, 1998,  PNB issued $200 million in principal  amount of long-term
notes.

     The Company is also a party to three  separate  364-day  credit  facilities
totaling $275 million,  under which  short-term  borrowings are available to the
Company for general  corporate  purposes.  These short-term  facilities  contain
financial  covenants  generally  similar  to those  contained  in the  Company's
revolving credit facility  described  above.

     In February 1997,  Providian  Capital I, a subsidiary trust of the Company,
issued  $160  million  aggregate  amount  of  mandatorily   redeemable   capital
securities  bearing  interest  at 9.525%,  which  mature in February  2027.

     The  securitization  of  consumer  loans  is a  significant  source  of the
Company's funding.  Commercial paper-based conduit facilities and other variable
funding  programs are used to securitize  certain  unsecured  credit card,  home
equity  line of credit and,  beginning  in the  quarter  ended  March 31,  1998,
secured and partially secured credit card receivables. As of March 31, 1998, the
Company had $2.0 billion of outstanding securitized loans under such conduit and
variable  funding  facilities.   Outstanding  term  securitizations   under  the
Company's  master  trust  totaled  $4.9  billion  as of  March  31,  1998.  Term
securitizations   typically  have  either  amortization  periods  during  which
principal is paid to investors or principal  accumulation  periods  during which
principal  payments  are  aggregated  for  repayment to investors on an expected
maturity  date.   Amortization  or  accumulation  of  principal  for  previously
securitized  loans totaled $375 million  during the three months ended March 31,
1998. As securitized loans are reduced through principal  repayment or principal
accumulation,  the Company's on-balance sheet loans will increase, to the extent
such reductions are not offset by loan  attrition.  Such increases are funded by
the Company through new securitizations or other funding sources.
<PAGE>

     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 annual  percentage  rate ("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 rate liabilities,  the Company uses variable rate liabilities
to fund a portion of its fixed APR assets.

     The Company uses derivative financial instruments,  including interest rate
swap and cap agreements, with indices that generally correlate to managed assets
or  liabilities to modify its net interest  sensitivity to levels  determined by
management to be appropriate  based on the Company's  current economic  outlook.
The following table presents the notional amounts of interest rate swap, cap and
floor agreements for the periods indicated:

--------------------------------------------------------------------------------
                  TABLE 8 - SUMMARY OF INTEREST RATE SWAPS/CAPS
--------------------------------------------------------------------------------

                                              Three Months Ended March 31
                                         ---------------------------------------
(Dollars in thousands)                        1998                   1997
                                         -----------------      ----------------


Interest rate swap agreements:
         Beginning Balance                 $ 955,500            $ 1,290,500
         Additions                           100,000                 33,333
         Maturities                          100,000                233,333
                                         -----------------      ----------------
         Ending Balance                    $ 955,500            $ 1,090,500
                                         =================      ================

Interest rate caps and floors:
         Beginning Balance                 $ 922,220            $ 1,522,450
         Additions                              -                    37,500
         Maturities                          212,750                100,000
                                         -----------------      ----------------
         Ending Balance                    $ 709,470            $ 1,459,950
                                         =================      ================




     The Company's goal in managing  liquidity is to ensure that funding will be
available to support the Company's operations in varying business  environments.
In  addition  to the  Company's  credit  facilities,  the  Company  maintains  a
portfolio  of  high-quality  securities  such  as U.S.  government  obligations,
commercial paper, interest bearing deposits with other banks, federal funds sold
and other cash equivalents.  Investment securities increased from $172.8 million
as of December 31, 1997 to $270.5  million as of March 31, 1998.  Federal  funds
sold increased from $115.0 million to $319.9 million over the same period.

     As part of its comprehensive risk management strategy,  the Company entered
into an  agreement  to sell  equity  put  warrants  for  250,000  shares  of the
Company's Common Stock in April 1998. The warrants entitle the holder to sell to
the Company,  by physical  delivery,  shares of the Company's  common stock at a
specified  price per share.  The  warrants  are  intended to mitigate  the price
volatility that may result from the Company's  repurchase of its common stock to
cover grants made as part of the Company's equity-based benefit plans.

<PAGE>

Capital Adequacy

     Each of the Company's banking subsidiaries is subject to risk-based capital
adequacy  guidelines  as defined by its primary  federal  regulator.  Capital is
defined as either Tier 1 (core),  which consists  principally  of  shareholders'
equity less goodwill,  or Tier 2 (supplementary),  which also includes a portion
of the reserve for credit losses.  Based on these  definitions  of capital,  the
regulations  further  define  three  capital  adequacy  ratios  that are used to
measure  whether  a  financial   institution   achieves  "well  capitalized"  or
"adequately capitalized" status:

<TABLE>
<CAPTION>

                                                                                   "Well         "Adequately
                                                                                   Capitalized   Capitalized
 Capital Ratio                      Calculation                                    Ratios"       Ratios"
 -------------     ---------------------------------------------------------       ------------  ------------
 <S>               <C>                                                             <C>           <C>
 Total Risk-Based  Total Risk-Based (Tier 1 + Tier 2/total risk-based assets)      =>10%         =>8% <10%
 Tier 1            Tier 1 (Tier 1/total risk-based  assets)                        => 6%         =>4%  <6%
 Leverage          Leverage (Tier 1/average total assets less intangibles)         => 5%         =>4%  <5%
</TABLE>


     As of March  31,  1998,  each of the  Company's  banking  subsidiaries  was
considered "well  capitalized"  based on its risk-based  capital ratios,  as set
forth below:
<TABLE>
<CAPTION>

                                                                         Providian               
                                                                         National             Providian
          Capital Ratio                                                  Bank                 Bank
 ---------------------------------------------------------               --------             -----------        
 <S>                                                                     <C>                  <C>                            
 Total Risk-Based (Tier 1 + Tier 2/total risk-based assets)              15.62%               20.60%
 Tier 1 (Tier 1/total risk-based assets)                                 14.63%               19.21%
 Leverage (Tier 1/average total assets less intangibles)                 15.50%               10.27%

</TABLE>

     On February  18, 1998,  the Board of  Directors  of the Company  approved a
first  quarter  dividend  of  $.05  per  share  payable  on  March  16,  1998 to
shareholders  of record on March 2, 1998. The payment of dividends on the common
stock of the Company may in the future be limited by certain factors,  including
regulatory  capital   requirements  and  financial  covenants  relating  to  the
maintenance of capital under the Company's credit  facilities.  In addition,  if
the  Company  defers  interest  payments on the junior  subordinated  debentures
supporting  dividend  payments to holders of Providian  Capital I's  mandatorily
redeemable  capital  securities,  the Company  will not be  permitted to declare
dividends on its common stock.

     The  primary  source of funds for payment of accrued  distributions  on the
Capital Securities and dividends on the common stock of the Company is dividends
from its  banking  subsidiaries.  The amount of  dividends a bank may declare is
generally  limited  to the sum of its net profit  for the  current  year and its
retained  earnings for the prior two years,  less any dividends  declared during
the  related  three-year  measurement  period.  Also,  a bank  may  not  declare
dividends if such  declaration  would leave the bank  inadequately  capitalized.
Therefore,  the Company's  ability to pay accrued  distributions  on the Capital
Securities  and  dividends on its common stock  depends on the future net income
and capital requirements of the Company's banking subsidiaries.


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.

     The Company has been named as a defendant in various legal actions  arising
in the ordinary course of the Company's business. 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.

Item 5.  Other Information.

     On May 1, 1998, the Company,  through its  subsidiary,  Providian  National
Bank,  purchased from First Union Direct Bank, N.A.  ("First Union") a portfolio
of unsecured credit card receivables and the related accounts, records and other
rights.  The acquired  portfolio  consists of approximately  501,000 credit card
accounts, of which approximately 293,000 accounts are active. The purchase price
paid for the acquired  portfolio  was  approximately  $974  million,  subject to
certain  post-closing  adjustments,  and was established in negotiations between
the Company and First Union.  The Company  funded the  acquisition  with working
capital and funds drawn  under the  Company's  revolving  credit  facility.  The
Company did not and does not plan to acquire any fixed  assets or  employees  of
First Union in connection with the portfolio acquisition.

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

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

         Exhibit 27.1  Financial Data Schedule.

         (b) Reports on Form 8-K.

     The  Company  filed a  Current  Report  on Form 8-K on  February  13,  1998
describing the purchase of a portfolio of unsecured  credit card receivables and
the related  accounts,  records and other rights by Providian  National  Bank, a
subsidiary of the Company, from First Union Direct Bank, N.A.

                                   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: May 14, 1998                       /s/ David J. Petrini
                                         --------------------
                                         David J. Petrini
                                         Senior Vice President, Chief Financial
                                         Officer and Treasurer
                                         (Principal Financial Officer and Duly
                                         Authorized Signatory)


Date: May 14, 1998                       /s/ Daniel Sanford
                                         ------------------
                                         Daniel Sanford
                                         Vice President and Controller
                                         (Chief Accounting Officer and Duly
                                         Authorized Signatory)
<PAGE>


                                  EXHIBIT INDEX


Exhibit No.

Exhibit 27.1   Financial Data Schedule