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 September 30, 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 October 31, 1998,  there were 94,403,221  shares of the  registrant's
Common Stock, par value $0.01 per share, outstanding.

<PAGE>

                         PROVIDIAN FINANCIAL CORPORATION
                                    FORM 10-Q

                                      INDEX


                               September 30, 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.........................................28

         Item 5.    Other Information.........................................28

         Item 6.    Exhibits and Reports on Form 8-K..........................28

Signatures....................................................................29


<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements.

<TABLE>
<CAPTION>

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

                                                                                   September 30          December 31
                                                                                       1998                 1997
                                                                                   ------------          -----------
<S>                                                                                <C>                   <C>           
Assets:                                 
Cash and cash equivalents                                                          $   142,975           $   112,522
Federal funds sold                                                                     216,039               114,960   
Investment securities at cost (which approximates market value)                        186,005               172,756
Securities available for sale                                                           88,064                 --
Loan held for securitization or sale                                                      --                 450,233
Loans receivable, less allowance for credit losses of $409,077 at 
 September 30, 1998 and $145,312 at December 31, 1997                                4,576,352             2,815,364
Due from securitizations                                                               389,931               472,145
Interest receivable                                                                     99,085                80,434
Premises and equipment, net                                                             75,664                61,625
Deferred taxes                                                                         175,454                66,511
Other assets                                                                           106,108               102,863
                                                                                   -----------           -----------
        Total assets                                                               $ 6,055,677           $ 4,449,413
                                                                                   ===========           ===========
Liabilities:
Deposits                                                                           $ 3,926,721           $ 3,212,766
Term federal funds purchased                                                           309,000               150,000
Notes payable to banks                                                                    --                  82,000
Long-term notes payable                                                                399,737                  --
Deferred fees                                                                          246,891                64,696
Accrued expenses and other liabilities                                                 295,772               184,837
                                                                                   -----------           -----------
        Total liabilities                                                            5,178,121             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: September 30, 1998 - 94,683,465 shares;
  December 31, 1997 - 95,156,545 shares)                                                   954                   954
Additional paid-in capital                                                                 --                  4,217
Retained earnings                                                                      765,543               599,856
Common stock held in treasury - at cost: (September 30, 1998 - 741,855
   shares; December 31, 1997 - 268,775 shares)                                         (48,941)               (9,913)
                                                                                   -----------           -----------
     Total shareholders' equity                                                        717,556               595,114
                                                                                   -----------           -----------
     Total liabilities and shareholders' equity                                    $ 6,055,677           $ 4,449,413
                                                                                   ===========           ===========
See notes to condensed consolidated financial statements 

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

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

                                                             Three Months Ended               Nine Months Ended
                                                                September 30                     September 30
                                                            --------------------          -------------------------
                                                            1998        1997                 1998           1997
                                                            ---------  ---------          ---------      ----------
<S>                                                         <C>        <C>                <C>            <C>  
Interest income:
    Loans                                                   $ 210,565  $ 135,799          $ 565,848      $  414,340
    Investment securities                                       7,661      6,880             23,175          20,209
                                                            ---------  ---------          ---------      ----------     
    Total interest income                                     218,226    142,679            589,023         434,549

Interest expense:
    Deposits                                                   51,153     40,499            146,276         122,466
    Borrowings                                                  9,997      3,749             31,161          16,201
                                                            ---------  ---------          ---------      ----------
    Total interest expense                                     61,150     44,248            177,437         138,667

           Net interest income                                157,076     98,431            411,586         295,882

Provision for credit losses                                   168,217     43,071            343,724         115,823
                                                            ---------  ---------          ---------      ----------

           Net interest income after provision
           for credit losses                                 (11,141)     55,360             67,862         180,059

Non-interest income:
    Loan servicing income                                     156,341    111,320            427,134         296,146
    Credit product fee income                                 199,236     67,881            416,491         150,633
    Other                                                       1,723        201              2,387             702
                                                            ----------  --------          ---------      ----------
                                                              357,300    179,402            846,012         447,481
Non-interest expenses:
    Salaries and employee benefits                             64,965     54,003            185,610         142,441
    Solicitation                                               53,258     39,717            141,533         107,730
    Occupancy, furniture and equipment                         12,963      9,764             35,317          27,563
    Data processing and communication                          16,005     13,449             53,839          37,235
    Other                                                      63,315     38,868            165,185          92,747
                                                           ----------  ---------          ---------      ----------
                                                              210,506    155,801            581,484         407,716
                                                           ----------  ---------          ---------      ----------
           Income before income taxes                         135,653     78,961            332,390         219,824

Income tax expense                                             53,092     30,397            130,858          82,374
                                                           ----------  ---------          ---------      ----------
           Net Income                                      $   82,561  $  48,564          $ 201,532      $  137,450
                                                           ==========  =========          =========      ==========
Basic earnings per share                                   $     0.87  $    0.51          $    2.13           N/A
                                                           ==========  =========          =========      ==========
Earnings per share - assuming dilution                     $     0.85  $    0.50          $    2.08           N/A
                                                           ==========  =========          =========      ==========
Dividends paid per share                                   $     0.05  $    0.05          $    0.15       $    0.05
                                                           ==========  =========          =========      ==========
Weighted average common shares outstanding - basic (000)       94,696     95,047             94,744           N/A
                                                           ==========  =========          =========      ==========
Weighted average shares and assumed conversions (000)          97,000     96,059             96,792           N/A
                                                           ==========  =========          =========      ==========

See notes to condensed consolidated financial statements 

</TABLE>

<PAGE>

<TABLE>
<CAPTION> 

PROVIDIAN FINANCIAL CORPORATION AND SUBSIDIARIES   
Condensed   Consolidated Statements of Changes in Shareholders' Equity 
(Dollars in thousands,  except per share data) (unaudited)    
                                                     
                                                7.25%                                          Cumulative     Common 
                                              Cumulative              Additional                 Other         stock
                                              Preferred     Common     Paid-In    Retained     Comprehensive  Held in         
                                                Stock       Stock      Capital    Earnings       Income       Treasury     Total
                                             ----------    --------   ----------  -----------  -----------    ---------- ----------
<S>                                          <C>           <C>        <C>         <C>          <C>            <C>        <C>   
Balance at December 31, 1996                 $   63        $   5      $  63,706   $  419,370   $   --         $   --     $  483,144
Net Income                                                                           137,450                                137,450
Cash dividend:
    Common - $0.05 per share                                                          (4,762)                                (4,762)
    Preferred (paid to former parent)                                                 (1,006)                                (1,006)
Redemption of  preferred stock                  (63)                    (63,207)                                            (63,270)
Net issuance of shares pursuant
    to the Distribution Agreement                            948           (499)        (449)                                  --
Purchase of 400,000 common
    shares for treasury                                                                                        (14,616)     (14,616)
Exercise of stock options                                                (1,352)                                 3,168        1,816
Reimbursement relating to the
    conversion of stock options                                           6,846                                               6,846
Issuance of restricted and
    unrestricted stock less
    forfeited shares                                           1          5,443                                  4,256        9,700
Deferred compensation related to
    grant of restricted and
    unrestricted stock                                                   (9,701)                                             (9,701)
Amortization of deferred compensation                                       562                                                 562
                                             ==========    ========   ==========  ===========  ===========    ========== ==========
Balance at September 30, 1997                $  --         $ 954      $   1,798  $   550,603   $   --         $ (7,192)  $  546,163
                                             ==========    ========   ==========  ===========  ===========    ========== ==========


Balance at December 31, 1997                 $  --         $ 954      $   4,217  $   599,856   $   --         $ (9,913)  $  595,114
Comprehensive Income:                                                                
    Net Income                                                                       201,532                                201,532
      Other comprehensive income,                                                    
      net of income tax;
        Unrealized loss on
        securities net of
        income taxes of $30                                                                        (266)                       (266)
                                                                                                                         ----------
Comprehensive Income                                                                                                        201,266
Cash dividend:
    Common - $0.15 per share                                                         (14,272)                               (14,272)
Cash Dividend Declared:
    Common - $0.05 per share                                                          (7,101)                                (7,101)
Stock Dividend Declared:
    Dividend rate of 50%. Par $0.01                                         473         (473)                                   --  
Purchase of 1,041,229 common
    shares for treasury                                                   4,251                                (74,293)     (70,042)
Exercise of stock options and other awards                              (12,334)     (13,733)                   31,580        5,513
Issuance of restricted and
    unrestricted stock less
    forfeited shares                                                      1,420                                  3,685        5,105
Deferred compensation related to
      grant of restricted and
      unrestricted stock less amortization of $2,890                     (2,215)                                             (2,215)
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 September 30, 1998                $   --        $ 954      $   --      $  765,809   $   (266)      $(48,941)  $  717,556
                                             ==========    ========   ==========  ===========  ===========    =========  ==========

See notes to condensed consolidated financial statements 

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

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

                                                                                                Nine Months Ended
                                                                                                  September 30
                                                                                          --------------------------
                                                                                               1998          1997
                                                                                          ------------  ------------
<S>                                                                                       <C>           <C>              
Operating Activities:
    Net Income                                                                             $  201,532   $   137,450
    Adjustments  to  reconcile  net  income to net cash  provided  by  operating
    activities:
      Provision for credit losses                                                             343,724       115,823
      Depreciation and amortization of premises and equipment                                  13,020        10,969
      Amortization of net loan acquisition costs                                               34,750        28,592
      Amortization of discount on sale of loans receivable                                        296           338
      Amortization of deferred compensation
        related to restricted and unrestricted stock                                            2,890           561
      Amortization of deferred fees                                                          (117,319)      (37,093)
      (Increase) decrease in deferred income tax benefit                                     (108,912)       10,920
      Increase in deferred fees                                                               299,514        55,073
      Increase in interest receivable                                                         (18,651)      (15,312)
      Increase in other assets                                                                (37,663)      (45,976)
      Increase (decrease) in accrued expenses and other liabilities                           106,697        (1,613)
                                                                                          ------------  ------------
                        Net Cash Provided by Operating Activities                             719,878       259,732

Investing Activities:
    Adjustments   to  reconcile  net  income  to  net  cash  used  by  investing
    activities:
      Net increase in money market instrument investments                                     (17,825)         -     
      Net cash used for loan originations and principal
        collections on loans receivable                                                      (782,028)   (1,052,994)
      Net proceeds from securitization of loans                                             1,050,019     1,556,590
      Portfolio acquisitions                                                               (1,922,766)         -
      Decrease (increase) in due from securitizations                                          82,214      (122,554)
      Purchases of investment securities                                                      (98,860)     (471,549)
      Proceeds from maturities of  investment securities                                       15,075       307,419
      Increase in federal funds sold                                                         (101,079)     (103,410)     
      Net purchases of premises and equipment                                                 (27,391)      (19,249)
                                                                                          ------------  ------------
                        Net Cash (Used) Provided by Investing Activities                   (1,802,641)       94,253

Financing Activities:
    Adjustments  to  reconcile  net  income to net cash  provided  by  financing
    activities:
      Net increase (decrease) in deposits                                                     713,955      (311,262)
      Proceeds from issuance of term federal funds                                            594,000       304,000
      Repayment of term federal funds                                                        (435,000)     (287,000)
      Decrease in notes payable to banks                                                      (82,000)       (6,000)
      Decrease in note payable to affiliates                                                     -          (42,500)             
      Increase (decrease) in long-term notes payable                                          399,737       (50,000)
      Proceeds from the issuance of capital securities                                           -          160,000
      Redemption of preferred stock                                                              -          (63,270)
      Reimbursement relating to conversion of stock options                                      -            6,846
      Purchase of treasury stock                                                              (70,042)      (14,616)
      Put warrant premium                                                                       1,325          -
      Dividends paid                                                                          (14,272)       (5,768)
      Proceeds from exercise of stock options                                                   5,513         1,054
                                                                                          ------------  -----------
                        Net Cash Provided (Used) by Financing Activities                    1,113,216      (308,516)
                                                                                          ------------  -----------
Net Increase in Cash and Cash Equivalents                                                      30,453        45,469
Cash and Cash Equivalents at beginning of year                                                112,522        82,946
                                                                                          ------------  -----------
Cash and Cash Equivalents at end of period                                                 $  142,975    $  128,415
                                                                                          ============  ===========

See notes to condensed consolidated financial statements.

</TABLE>

<PAGE>

PROVIDIAN FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements
September 30, 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 nine months ended
September  30, 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 nine months ending September 30, 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 nine  months  ended  September  30,  1997,  have been
computed  below 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>
                                                  Nine Months Ended September 30
(In thousands, except per share data)                       1998        1997 (1)
--------------------------------------------------------------------------------
Income available to common stockholders                    $201,532     $137,450
                                                           =====================

     Weighted average shares outstanding--basic              94,744       94,723
     Effect of dilutive securities
      Restricted stock issued--non vested                       344           97
      Employee stock options                                  1,704          687
                                                           --------     --------
     Dilutive potential common shares                         2,048          784
                                                           =====================
     Adjusted weighted average shares and assumed
      conversions                                            96,792       95,507
                                                           =====================

     Earnings per share                                    $   2.13     $   1.45
                                                           =====================

     Earnings per share--assuming dilution                 $   2.08     $   1.44
                                                           =====================

     (1)  Earnings per share for the nine months  ended  September  30, 1997 are
     presented  on a pro forma  basis.  For  purposes of pro forma  earnings per
     share,  net income has not been adjusted for 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 Acquisitions and Allowance for Credit Losses

     During the first nine months of 1998,  the Company  completed two purchases
of portfolios of unsecured  credit card loans from First Union Direct Bank, N.A.
("First Union") for approximately  $948 million and $974 million,  respectively,
in  cash  (the  "Portfolio   Acquisitions").   These  two  portfolios   included
approximately  1,050,000  account  relationships  and related  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  portfolio  acquisitions.  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 nine months ended
September 30, 1998 and 1997 is as follows (in thousands):

                                                 Nine Months Ended September 30
                                                        1998             1997
-------------------------------------------------------------------------------
Balance at beginning of period                      $ 145,312        $ 114,540  
Provision for credit losses                           343,724          115,823
Reserve acquired                                      178,459             -- 
Charge-offs                                          (279,877)         (96,583) 
Recoveries                                             21,459            9,309
                                                    ---------------------------
Net charge-offs                                      (258,418)         (87,274)
                                                    ---------------------------
Balance at end of period                            $ 409,077        $ 143,089
                                                    ===========================

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 nine  months
ended  September  30,  1998,  PNB issued  $400  million in  principal  amount of
long-term notes with an average interest rate of 6.58%.

Note 6 - Shareholders' Equity

     In June 1998,  the Company  entered into an  agreement  to  purchase,  on a
forward basis, 500,000 shares of its common stock. At the Company's election, in
September 1998 a final  settlement of the agreement was made on a physical basis
and the  agreement  was  terminated.  As a result  of the final  settlement  and
previous interim settlements,  the Company purchased, in the aggregate,  500,000
shares of its common stock under the  agreement at an effective  price of $71.10
per share.

     In July 1998,  the Company  entered into an  agreement  to  purchase,  on a
forward  basis,  an  additional  500,000  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 Providian  Financial 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 net
differential is received by the Company.  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 premium amount is paid by the Company.  As of September 30,
1998, the agreement  covered  500,000 shares of the Company's  common stock at a
forward price of $82.32 per share.  The agreement has a term of one year but may
be settled  earlier.  If this agreement were settled on a net share basis at the
September  30, 1998 market price of the  Company's  common stock  ($84.8125  per
share),  the Company  would  receive  approximately  14,700 shares of its common
stock.  During the quarter ended September 30, 1998, interim premium settlements
totalling $418,482 were recorded as adjustments to additional paid in capital.


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 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, risks related to
growth,  product  development,   acquisitions  and  operations,  and  year  2000
readiness.  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  September 30, 1998 was $82.6 million,  or
$0.85 per diluted share,  compared to net income of $48.6 million,  or $0.50 per
diluted share, for the quarter ended September 30, 1997. Net income for the nine
months ended September 30, 1998 was $201.5 million,  or $2.08 per diluted share,
compared to net income of $137.5 million,  or $1.44 pro forma per diluted share,
for the  first  nine  months  of  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 the nine months ended  September 30, 1997
because  until 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
increased  non-interest  income,  growth in managed loans outstanding and higher
year to date managed net interest  margins,  offset by higher net credit  losses
and increased non-interest expenses.  Credit product fee income increased 193.5%
to $199.2  million for the quarter  ended  September  30, 1998 compared to $67.9
million for the  quarter  ended  September  30,  1997.  Strong  customer  growth
combined with an increased penetration rate for sales of the Company's fee-based
products to its customer base fueled this increase in revenue.  Average  managed
loans outstanding increased to $11.6 billion for the quarter ended September 30,
1998 from $9.4 billion for the quarter ended September 30, 1997,  reflecting the
impact  of  marketing  and  customer   activation   efforts  and  the  Portfolio
Acquisitions.  End of period managed loans receivable increased to $11.8 billion
as of September 30, 1998 from $9.5 billion as of September 30, 1997.  On-balance
sheet loans also  increased  year over year to $5.0 billion as of September  30,
1998, compared to $3.0 billion as of September 30, 1997.

     From  December  31,  1997  to  September  30,  1998,  total  managed  loans
outstanding   increased  $1.9  billion  to  $11.8  billion  from  $9.9  billion,
reflecting new customer balances realized from marketing activity, activation of
existing customers and Portfolio  Acquisitions,  offset by balance attrition due
to payments and credit loss activity. The Company added 3.7 million new customer
accounts during the nine months ended September 30, 1998 of which  approximately
1,050,000 are new accounts from the Portfolio Acquisitions.  New accounts add to
the Company's customer base for fee-based product sales.

     Return on average total managed assets for the three months ended September
30, 1998 was 2.63%,  compared to 1.83% for the same period  during 1997.  The 80
basis point increase is primarily due to increased  fee-based  product and other
fee income and to higher  managed net interest  income driven by higher  average
loan portfolio balances.  Return on average  shareholders'  equity for the three
months  ended  September  30, 1998 was  45.74%,  compared to 36.58% 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. The Company has securitized  unsecured credit card and revolving lines of
credit since 1989 and home equity  lines of credit  since 1996.  During the nine
months ended September 30, 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>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                      TABLE 1 - MANAGED CONSUMER LOAN PORTFOLIO INFORMATION
----------------------------------------------------------------------------------------------------------------------
                                                            Three Months Ended               Nine Months Ended
                                                               September 30                     September 30
                                                    ----------------------------   -----------------------------
(Dollars in thousands)                                   1998         1997             1998               1997
                                                    ------------    ----------     ------------      -----------
<S>                                                 <C>             <C>            <C>               <C>                   
Period-End Balances:
On-balance sheet consumer loans                     $  4,987,023    $ 3,098,427    $  4,987,023      $ 3,098,427
Securitized consumer loans                             6,791,163      6,444,925       6,791,163        6,444,925
                                                    ------------    -----------    ------------      -----------  
     Total managed consumer loan portfolio          $ 11,778,186    $ 9,543,352    $ 11,778,186      $ 9,543,352    
                                                    ============    ===========     ===========      ===========
Average Balances:
On-balance sheet consumer loans                     $  4,793,697    $ 3,028,584    $  4,393,731      $ 3,152,565
Securitized consumer loans                             6,791,077      6,365,213       6,737,492        6,098,479
                                                     -----------    -----------    ------------      -----------
    Total average managed consumer loan portfolio   $ 11,584,774    $ 9,393,797    $ 11,131,223      $ 9,251,044
                                                    ============    ===========    ============      ===========
Operating Data and Ratios:
Reported:
      Average earning assets                        $  5,317,068    $ 3,484,670    $  4,930,255      $ 3,633,706
      Return on average assets                             5.74%          4.73%           4.89%            4.39%
      Net interest margin (1)                             11.82%         11.30%          11.13%           10.86%
Managed:
      Average earning assets                        $ 12,108,145    $ 9,849,883    $ 11,667,747     $  9,732,185
      Return on average assets                             2.63%          1.83%           2.13%            1.75%
      Net interest margin (1)                             11.82%         11.05%          11.07%           10.55%

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

</TABLE>


     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 September 30, 1998 and
1997,  as a result of  securitization,  the  Company's  net interest  income was
reduced by $200.9 million and $173.6  million,  respectively;  the provision for
credit losses was reduced by $110.6  million and $115.8  million,  respectively;
and  non-interest  income was  increased  by $90.3  million  and $57.8  million,
respectively. For the nine months ended September 30, 1998 and 1997, as a result
of  securitization,  the  Company's  net  interest  income was reduced by $557.0
million and $474.1  million,  respectively;  the provision for credit losses was
reduced by $357.8 million and $348.6  million,  respectively;  and  non-interest
income was increased by $199.2 million and $125.5 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 with respect
to deposits and borrowings. The Company's securitization of consumer loans has a
significant  effect on the volume of on-balance  sheet loans and borrowings and,
to a lesser degree, on deposits, and will cause variations in such balances over
time.

     Net interest  income for the third quarter of 1998 totaled $157.1  million,
compared  to  $98.4  million  for the same  period  of 1997.  This  increase  is
primarily  attributable  to higher  average  on-balance  sheet  consumer  loans,
offset,  as  expected,  by the lower  yields on  consumer  loans  related to the
balances  recorded  in  the  Portfolio  Acquisitions.   Interest  expense  as  a
percentage of average interest-bearing  liabilities increased 9 basis points for
the third quarter of 1998 compared to the third quarter of 1997.  The annualized
net interest  margin on average earning assets for the third quarter of 1998 was
11.82%,  compared to 11.30% for the same period in the prior year, due primarily
to higher average equity as a percentage of assets during 1998.

     On a managed loan basis,  managed net interest income for the quarter ended
September 30, 1998 was $357.9  million,  compared to $272.0 million for the same
period in 1997, an increase of $85.9 million, or 31.6%. The managed net interest
margin on  average  managed  loans  increased  to 12.01% for the  quarter  ended
September 30, 1998, from 11.57% for the quarter ended September 30, 1997.  These
increases  in managed net interest  income and the managed net  interest  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  tables  provide an analysis of  interest  income,  interest
expense,  net interest margin and average balance sheet data for the three month
and nine month periods ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                           TABLE 2 - STATEMENTS OF AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND  RATES
---------------------------------------------------------------------------------------------------------------------
                                                              Three Months Ended September 30
                                          -------------------------------------  -------------------------------------
                                                         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                        $ 4,793,697    $ 210,565       17.57%  $ 3,028,584    $ 135,799      17.94%
    Interest-earning cash                      46,718          572        4.90%       71,657        1,281       7.15%               
    Federal funds sold                        181,538        2,573        5.67%      232,093        3,308       5.70%
    Investment Securities                     295,115        4,516        6.12%      152,336        2,291       6.02%
                                          -----------    ---------     --------- -----------    ----------    -------   
Total interest-earning assets               5,317,068    $ 218,226       16.42%    3,484,670    $ 142,679      16.38% 

Allowance for loan losses                    (376,307)                              (133,203)
Other assets                                  814,641                                751,731
                                          -----------                            -----------
Total assets                              $ 5,755,402                            $ 4,103,198
                                          ===========                            ===========

LIABILITIES AND EQUITY:
Interest-bearing liabilities
    Deposits                              $ 3,683,045    $  51,153        5.56%  $ 2,927,184    $  40,499        5.53%
    Borrowings                                646,355        9,997        6.19%      254,354        3,749        5.90%
                                          -----------    ---------     --------- -----------    ---------      -------  
Total interest-bearing liabilities          4,329,400    $  61,150        5.65%    3,181,538    $  44,248        5.56%
      
Other liabilities                             544,063                                230,250
                                          -----------                            -----------
Total liabilities                           4,873,463                              3,411,788

Capital securities                            160,000                                160,000

Equity                                        721,939                                531,410
                                          -----------                            -----------
Total liabilities and equity              $ 5,755,402                            $ 4,103,198
                                          ===========                            ===========

NET INTEREST SPREAD:                                                     10.77%                                10.82%
                                                                       =========                               =======
Interest income to
    average interest-earning assets                                      16.42%                                16.38%
Interest expense to
    average interest-earning assets                                       4.60%                                 5.08%
                                                                       ---------                               -------
   Net interest margin                                                   11.82%                                11.30%
                                                                       =========                               =======
 
  
                                                 Nine Months Ended September 30
                                   -----------------------------------------------------------------------------------
                                                     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                 $ 4,393,731     $ 565,848      17.17%         $ 3,152,565  $  414,340     17.52%
    Interest-earning cash               38,463         1,514       5.25%              93,333       4,051      5.79%
    Federal funds sold                 204,344         8,536       5.57%             278,511      11,475      5.49%
    Investment securities              293,717        13,125       5.96%             109,297       4,683      5.71%
                                   -----------     ---------     --------        -----------  ----------   --------
Total interest-earning assets        4,930,255     $ 589,023      15.93%           3,633,706  $  434,549     15.95%
                          

Allowance for loan losses            (301,279)                                      (125,105)
Other assets                          870,359                                        663,516
                                   -----------                                   -----------
Total assets                       $5,499,335                                    $ 4,172,117
                                   ===========                                   ===========

LIABILITIES AND EQUITY:
Interest-bearing liabilities
    Deposits                       $ 3,566,480     $ 146,276       5.47%         $ 3,002,449  $  122,466      5.44%
    Borrowings                         686,961        31,161       6.05%             345,626      16,201      6.25%
                                   -----------     ---------     --------        -----------  ----------   --------
Total interest-bearing liabilities   4,253,441     $ 177,437       5.56%           3,348,075  $  138,667      5.52%
                          
Other liabilities                      416,807                                       179,034
                                   -----------                                   -----------
Total liabilities                    4,670,248                                     3,527,109

Capital securities                     160,000                                       140,073

Equity                                 669,087                                       504,935
                                   -----------                                   -----------
Total liabilities and equity       $ 5,499,335                                   $ 4,172,117
                                   ===========                                   ===========

NET INTEREST SPREAD:                                              10.37%                                     10.43%
                                                                 ========                                  ========

Interest income to
    average interest-earning assets                               15.93%                                     15.95%
    
Interest expense to
    average interest-earning assets                                4.80%                                      5.09%
                                                                 --------                                  --------
Net interest margin                                               11.13%                                     10.86%
                                                                 ========                                  ========
</TABLE>

<PAGE>

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 September 30, 1998
compared  to the  prior  year  quarter  reflects  growth in  consumer  loans and
investment  securities,  resulting in higher  on-balance  sheet earning  assets.
Yields for on-balance  sheet loans decreased for the quarter ended September 30,
1998 compared to the prior year quarter, reflecting lower average finance charge
yields on the Acquired  Portfolios.  The  following  table sets forth the dollar
amount of the  increase  (decrease)  in  interest  income and  interest  expense
resulting from changes in volume, rates and interest income:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                            TABLE 3 - INTEREST VARIANCE ANALYSIS
---------------------------------------------------------------------------------------------------------------------------------

                                              Three Months Ended September 30               Nine Months Ended September 30
                                                       1998 vs. 1997                                1998 vs. 1997
                                      ------------------------------------------    -------------------------------------------
                                        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                       $  74,766        $  77,622    $  (2,856)      $ 151,508   $ 159,943   $  (8,435)
 Federal funds sold                        (735)            (718)         (17)         (2,939)     (3,103)        164
 Other securities                         1,516            1,814         (298)          5,905       6,038        (133)
                                      -----------      ---------    ----------      ----------  ----------  ----------
   Total interest income                 75,547           78,718       (3,171)        154,474     162,878      (8,404)

 Interest Expense:
 Deposits                                10,654           10,865         (211)         23,810      24,444        (634)
 Borrowings                               6,248            6,412         (164)         14,960      14,491         469
                                      -----------      ---------    ----------      ----------  ----------  ----------
   Total interest expense                16,902           17,277         (375)         38,770      38,935        (165)
                                      -----------      ---------    ----------      ----------  ----------  ----------
   Net interest income                $  58,645        $  61,441    $  (2,796)      $ 115,704   $ 123,943   $  (8,239)
                                      ===========      =========    ==========      ==========  ==========  ==========

(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.

</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  62% of gross on-balance sheet revenues for the three months ended
September  30, 1998,  compared to  approximately  56% for the three months ended
September 30, 1997.  For the nine months ended  September 30, 1998 and 1997, fee
income  represented  59%  and  51%,  respectively,  of  gross  on-balance  sheet
revenues.  The increase in non-interest  income resulted from increased sales of
the Company's fee-based products and higher loan servicing income, due primarily
to higher average securitized assets.

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 $6.8 billion during the three months ended  September 30, 1998,
compared  to $6.4  billion  for the same  period of 1997,  a 6%  increase.  Loan
servicing  income  increased  40%,  to $156.3  million,  for the  quarter  ended
September 30, 1998,  compared to $111.3 million for the same period in 1997. For
the nine months ended September 30, 1998, loan servicing income increased 44.2%,
to $427.1 million, from $296.1 million for the same period in 1997. The increase
in  loan  servicing   income  resulted  from  higher  net  interest  margins  on
securitized  receivables,  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 $1.8
million and $56.2  million  during the nine months ended  September 30, 1998 and
1997, respectively.  The decrease reflects the impact of SFAS No. 125 during the
first nine  months 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 period. 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  increased  193.5%,  to $199.2  million,  for the
quarter ended  September 30, 1998,  compared to $67.9 million for the prior year
quarter. For the nine months ended September 30, 1998, credit product fee income
increased 176.5%, to $416.5 million,  from $150.6 million for the same period in
1997.  These increases  resulted from increased  customer volume realized in all
fee categories. Managed fee-based product income, including the Company's Credit
Protection,  Home  Protection,  DrivePro and other products,  increased to $61.1
million for the quarter ended September 30, 1998 from $22.0 million for the same
period in 1997,  reflecting higher  penetration rates for sales of the Company's
fee-based  products on an increasing  customer  base.  The Company's  accounting
policy with respect to fee-based  products is to recognize  related  acquisition
expenses as incurred and to defer revenue and recognize it monthly over the term
of the  fee-based  product,  beginning  after the end of the free or  money-back
guarantee period.

     The  growth  in  Unbanked  Product  customers  has  contributed  to  higher
membership  and  processing  fees.  In addition,  late and  overlimit  fees have
increased as a result of increased volume and repricing initiatives  implemented
in prior periods.  The Company's Unbaked Products  primarily consist of secured,
partially secured and unsecured credit cards designed to serve a population that
the Company  believes  has been largely  underserved  by  traditional  financial
institutions due to a lack of credit history or past credit problems.

Non-Interest Expense

     Non-interest  expense for the three  months  ended  September  30, 1998 was
$210.5 million,  an increase of 35% over non-interest  expense of $155.8 million
for the same period in the prior year.  Salaries and employee benefits increased
$11 million,  or 20%, to $65 million for the three months  ended  September  30,
1997,  compared  to $54  million  for the same  period in the prior  year.  This
increase reflects an increase in the employee base to support increased customer
service volume and additional account acquisition  efforts.  Solicitation costs,
which include direct mail, postage, telemarketing and package materials for both
new  and  existing  customers,  totaled  $53.3  million  for the  quarter  ended
September  30, 1998, a 34% increase  over the prior year quarter  total of $39.7
million. This increase in solicitation costs resulted from increased investments
in the direct mail and direct telemarketing  acquisition channels and from other
initiatives designed to improve customer activation and retention.

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  Providian's  financial
institution  subsidiaries,  the Company launched a Year 2000 project in November
1996.  Providian's Year 2000 project  consists of five phases:  (1) the planning
phase,  in which the Year 2000 project  team defined the approach to  addressing
the Year 2000  issue;  (2) an  inventory  of the  Company's  vendors,  hardware,
internally  developed  systems  and  third   party-provided   software  and  the
identification  of critical systems and critical  vendors;  (3) an assessment of
Year  2000  compliance;   (4)  modification  of  affected   systems,   including
replacement,  repair,  upgrade  or  retirement;  and (5)  testing  for Year 2000
compliance.

     Providian  is  currently  in  conformity  with  its  financial  institution
regulators'  Year 2000  requirements.  The planning,  inventory  and  assessment
phases are  substantially  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 are
scheduled to be completed by March 31,  1999,  and  infrastructure  upgrades are
scheduled  to be completed by 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 is scheduled to be
substantially   completed   by  December   31,   1998,   and  testing  of  third
party-provided  critical systems is scheduled to be  substantially  completed by
March 31,  1999.  Final  testing of all systems is  scheduled to be completed by
mid- July 1999. Statements regarding completion dates for various aspects of the
Year 2000 project are estimates only.  There can be no guarantee that the phases
of the  Company's  Year 2000  project  described  above will be  completed  when
anticipated.

     Providian  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  Providian's
critical vendors have represented to the Company that their systems and products
will be Year 2000  compliant by June 30,  1999.  The Company is  monitoring  the
progress  of its  critical  vendors  and other  third  parties  and  selectively
conducting tests to determine whether they have accurately  assessed the problem
and taken corrective  action.  There can be no assurance that third parties that
supply  products  and  services  to  the  Company's  critical  systems  will  be
successful in taking corrective action in a timely manner.

     If the  Company is  unsuccessful  in its  efforts to correct  its  critical
systems or if third  parties on whom the  Company  relies do not  correct  their
systems, the Company could experience  significant  disruption to its operations
(including loan  origination  and servicing),  its ability to obtain and provide
funds and its financial and accounting systems.  Such disruption 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.

     The Company is currently in the process of augmenting its existing business
resumption and disaster recovery plan to include  contingency plans with respect
to  disruptions  that might  result from Year 2000 issues.  The Company  expects
these contingency  plans to be substantially  completed during the first quarter
of 1999.  There can be no assurance  that any such plans will fully mitigate any
Year 2000 failures or problems.

     The   Company's   total  Year  2000  project   costs  are  expected  to  be
approximately $10 million and the Company has incurred  approximately $6 million
in Year 2000 project  expenses  through October 31, 1998. 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 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 to reflect
events  or  circumstances  after  such  date or to  reflect  the  occurrence  of
unanticipated events.

Income Taxes

     The  Company's  income tax expense,  which  includes both state and federal
taxes, was $53.1 million for the three months ended September 30, 1998, compared
to $30.4  million for the three months  ended  September  30, 1997.  The overall
year-to-date  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.  Subsequent  to the  acquisition  of a portfolio,  management  uses
methods  similar to those used for originated  portfolios to establish  reserves
for future 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.  Bankrupt accounts and accounts of
deceased  customers are  charged-off  upon  notification of bankruptcy or death.
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 September 30, 1998 and
1997:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                 TABLE 4 - DELINQUENCIES
----------------------------------------------------------------------------------------------------------
                                                                       September 30
                                          ----------------------------------------------------------------
                                                          1998                                     1997
                                          ------------------------------------   -------------------------
                                                              % of                                  % of
                                                              Total                                 Total
(Dollars in thousands)                        Loans           Loans                 Loans           Loans
                                          ------------  -------------            ------------   ----------
<S>                                       <C>           <C>                      <C>            <C>                       
Reported: (1)
Loans outstanding                         $  4,987,023        100.00%            $  3,098,427      100.00%
Loans delinquent:
    31 - 60 days                                96,409          1.93%                  55,497        1.79%
    61 - 90 days                                62,062          1.24%                  33,787        1.09%
    91 or more days                            126,523          2.54%                  70,338        2.27%
                                          ------------  -------------            ------------   ----------
    Total                                 $    284,994          5.71%            $    159,622        5.15%
                                          ============  =============            ============   ==========
Managed:
Loans outstanding                         $ 11,778,186        100.00%            $  9,543,352      100.00%
Loans delinquent:
    31 - 60 days                               219,754          1.87%                 164,744        1.72%
    61 - 90 days                               139,127          1.18%                  97,058        1.02%
    91 or more days                            260,889          2.21%                 180,045        1.89%
                                          ------------  --------------           ------------   ----------
    Total                                 $    619,770          5.26%            $    441,847        4.63%
                                          ============  ==============           ============   ==========

(1) Includes loans held for securitization.

</TABLE>


     The  managed  loan  delinquency  rate as of  September  30, 1998 was 5.26%,
compared to 4.22% as of December  31, 1997 and 4.63% as of  September  30, 1997.
The  increase in the managed loan  delinquency  rate over the prior year quarter
reflects the higher rates of delinquency  associated  with the loans acquired in
the Portfolio Acquisitions.  Excluding the effect of the Portfolio Acquisitions,
the  delinquency  rate at  September  30,  1998 would have been 4.69% pro forma,
slightly above the delinquency  rate at September 30, 1997. The delinquency rate
for on-balance sheet loans was 5.71% as of September 30, 1998, compared to 4.17%
as of December 31, 1997 and 5.15% as of September 30, 1997.  The increase in the
on-balance sheet loan delinquency rate reflects the effect of the loans acquired
in the  Portfolio  Acquisitions,  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.  Secured and partially  secured
Unbanked Product 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 (other than fee income  related to fee-based  products),
which are written  off as a reversal  of current  earnings at the time of credit
loss recognition.  Unpaid fee-based product revenue is recognized as part of the
principal  amount of the loan  balance and in the case of loan  charge-offs,  as
described  above,  is included  in net credit  losses.  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 and nine months ended September 30, 1998 and 1997:

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                   TABLE 5 - NET CREDIT LOSSES
--------------------------------------------------------------------------------------------------------------------
                                                        Three Months Ended                   Nine Months Ended
                                                            September 30                        September 30
                                                --------------------------------    --------------------------------
(Dollars in thousands)                               1998              1997              1998              1997
                                                --------------   ---------------    --------------   ---------------
<S>                                             <C>              <C>                <C>              <C>             
Reported: (1)
Average loans outstanding                       $   4,793,697    $  3,028,584       $   4,393,731    $   3,152,565
Net charge-offs                                 $     114,429    $     29,725       $     258,418    $      87,274
Net charge-offs as a percentage
   of average loans outstanding                         9.55%           3.93%               7.84%            3.69%

Managed:
Average loans outstanding                       $  11,584,774    $  9,393,797       $  11,131,223    $   9,251,044
Net charge-offs                                 $     225,089    $    145,527       $     616,303    $     435,834
Net charge-offs as a percentage
   of average loans outstanding                         7.77%           6.20%               7.38%            6.28%

(1) Includes loans held for securitization.

</TABLE>


     The managed net credit loss rate for the three months ended  September  30,
1998 was 7.77%,  compared to 7.56% for the quarter ended June 30, 1998 and 6.20%
for the quarter ended  September  30, 1997.  The increase over the prior quarter
reflects  the higher  credit loss rates on the loans  acquired in the  Portfolio
Acquisitions and account seasoning. During the quarter ended September 30, 1998,
the Company  entered  into an  agreement to  securitize  previously  charged-off
receivables  which the Company  continues to service.  Cash proceeds received by
the Company under this  agreement are treated as recoveries  and have the effect
of reducing  the net credit loss rate.  In  addition,  during the  quarter,  the
Company  revised its policy  relating to Chapter 13  bankruptcies so that credit
losses are recognized  immediately upon receipt of notification of filing, which
has the effect of increasing the net credit loss rate for the quarter. Excluding
only the  Portfolio  Acquisitions,  the  managed  net  credit  loss rate for the
quarter  ended  September  30, 1998 would have been 5.78% pro forma,  a decrease
from the prior  quarter  pro  forma  managed  net  credit  loss rate  (excluding
Acquired   Portfolios)   of  6.36%.   Excluding  the  impact  of  the  Portfolio
Acquisitions, the sale of previously securitized charged-off receivables and the
bankruptcy  policy  change,  the managed  credit loss rate for the quarter ended
September 30, 1998 would have been 6.18% pro forma.

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 and nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                       TABLE 6 - SUMMARY OF ALLOWANCE FOR CREDIT LOSSES
----------------------------------------------------------------------------------------------------------

                                                            Three Months Ended         Nine Months Ended
                                                                September 30             September 30
                                                      ------------------------     -----------------------
(Dollars in thousands)                                   1998           1997          1998          1997
                                                      -----------   -----------    ----------  -----------
<S>                                                   <C>           <C>            <C>         <C>        
Balance at beginning of period                        $  355,789    $  129,743     $ 145,312   $  114,540
Provision for credit  losses                             168,217        43,071       343,724      115,823
Reserve acquired                                            (500)          -         178,459         -
Charge-offs                                             (123,962)      (33,850)     (279,877)     (96,583)
Recoveries                                                 9,533         4,125        21,459        9,309
                                                      -----------   -----------    ----------  -----------
Net charge-offs                                         (114,429)      (29,725)     (258,418)     (87,274)
                                                      -----------   -----------    ----------   ----------
Balance at end of period                              $  409,077    $  143,089     $ 409,077   $  143,089
                                                      ===========   ===========    ==========  ===========

Allowance for credit losses to loans at period-end (1)     8.20%         4.76%         8.20%        4.76%

(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
retail and institutional  deposits, term federal funds, public and private asset
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
September 30, 1998:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                             TABLE 7 - CONTRACTUAL MATURITIES OF DEPOSIT
----------------------------------------------------------------------------------------------------------------------

                                                       September 30, 1998                     September 30, 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                       $   301,995  $   186,922 $   488,917   $   251,005  $  123,120  $   374,125
Over three months through 12 months            849,989      315,254   1,165,243       662,996     193,040      856,036
Over one year through five years               678,503      610,865   1,289,368       437,071     461,029      898,100
Deposits without contractual maturity          912,176       71,017     983,193       891,386      59,202      950,588
                                           ------------------------------------   ------------------------------------     
     Total Deposits                        $ 2,742,663  $ 1,184,058 $ 3,926,721   $ 2,242,458  $  836,391  $ 3,078,849
                                           -------------------------------------  ------------------------------------
</TABLE>


     Deposits  increased  to $3.9  billion as of  September  30,  1998 from $3.2
billion as of December  31,  1997.  This  increase  resulted  from  management's
efforts to increase  deposits to provide funding for on-balance  sheet loans and
investment securities used in liquidity management.

     Interest expense on borrowings for the quarter ended September 30, 1998 was
$10.0  million,  compared to $3.7 million for the quarter  ended  September  30,
1997. This increase was the result of higher average  borrowings of term federal
funds purchased and long-term notes payable.

     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 September 30, 1998, there
were no outstanding borrowings under the credit facility. Among other covenants,
the credit  facility  contains  certain  financial  covenants  applicable to the
Company,  including consolidated return on assets 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.

     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. No borrowings under these short-term
facilities were outstanding at September 30, 1998.

     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 nine
months ended September 30, 1998, PNB issued $400 million in principal  amount of
long-term notes.

     In addition,  in June 1998 the Company  filed a shelf  registration  for $2
billion of debt  and/or  equity  securities  with the  Securities  and  Exchange
Commission.  The availability and  attractiveness  of these and other sources of
funding  will depend upon a number of factors,  some of which will relate to the
financial  condition and  performance of the Company,  and some of which will be
beyond the Company's control, such as prevailing interest rates and other market
conditions.  There can be no assurance that additional debt or equity  financing
will be available or be available on terms attractive to the Company.

     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.  As of September  30, 1998,  the Company had $2.3 billion of
outstanding  securitized  loans under conduit and variable  funding  facilities.
Outstanding term  securitizations  under the Company's master trust totaled $4.5
billion as of September 30, 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.  During the nine months
ended September 30, 1998, accumulated principal for previously securitized loans
of $1,050.0  million was paid to  investors.  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.

     The Company also pursues a strategy of opportunistic acquisitions which may
from time to time require  funding.  Potential  funding sources for this purpose
include the following: cash flow from operations, borrowings under its revolving
credit  facilities,  asset  securitzations,  securities  issued  under its shelf
registration and issuances of privately placed debt or equity securities.  There
can be no certainty, however, that funding for acquisitions will be available on
terms favorable to the Company.

     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>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                  TABLE 8 - SUMMARY OF INTEREST RATE SWAPS/CAPS/FLOORS
----------------------------------------------------------------------------------------------------------
                                                   Three Months Ended               Nine Months Ended
                                                      September 30                    September 30
                                               ---------------------------       -------------------------
(Dollars in thousands)                             1998             1997            1998           1997
                                               -----------     -----------       ---------    ------------
<S>                                            <C>             <C>               <C>          <C>              
Interest rate swap agreements:
        Beginning Balance                      $   135,500     $   955,500       $ 955,500    $  1,290,500
        Additions                                  500,000            -            666,667          63,333
        Maturities                                    -               -            986,667         398,333
                                               -----------     -----------       ---------    ------------
        Ending Balance                         $   635,500     $   955,500       $ 635,500    $    955,500
                                               ===========     ===========       =========    ============

Interest rate caps and floors:
        Beginning Balance                      $   691,970     $ 1,347,200       $ 922,220    $  1,522,450
        Additions                                  172,481            -            504,981            -
        Maturities                                 191,720         212,500         754,470         387,750
                                               -----------     -----------       ---------    ------------
        Ending Balance                         $   672,731     $ 1,134,700       $ 672,731    $  1,134,700
                                               ===========     ===========       =========    ============
</TABLE>


     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,
mortgage backed  securities,  commercial  paper,  interest bearing deposits with
other  banks,  federal  funds  sold  and  other  cash  equivalents.   Investment
securities  increased  to $274.1  million as of  September  30, 1998 from $172.8
million as of December 31, 1997.  Federal funds sold increased to $216.0 million
from $115.0 million over the same period.

     As part of its  comprehensive  risk  management  strategy,  the Company may
enter into sale and purchase  transactions  on its common  stock.  The Company's
goal in managing  equity risk is to mitigate the effect of price  volatility  on
stock option grants made as part of the Company's  equity-based  benefit  plans.
During the first quarter of 1998, the Company  entered into an agreement to sell
equity put  warrants for 250,000  shares of the  Company's  stock.  The warrants
entitle the holder to sell to the  Company,  by physical  delivery,  a specified
number of shares of the  Company's  common stock at a price of $64.60 per share.
These put  warrants  may only be  exercised  on the  expiration  date,  which is
February 26, 1999.

     In June 1998,  the Company  entered into an  agreement  to  purchase,  on a
forward basis, 500,000 shares of its common stock. At the Company's election, in
September 1998 a final  settlement of the agreement was made on a physical basis
and the agreement was terminated.  As a result the final settlement and previous
interim settlements,  the Company purchased, in the aggregate, 500,000 shares of
its common stock under the agreement at an effective price of $71.10 per share.

     In July 1998,  the Company  entered into an  agreement  to  purchase,  on a
forward  basis,  an  additional  500,000  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 Providian  Financial 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 net
differential is received by the Company.  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 premium amount is paid by the Company.  As of September 30,
1998, the agreement  covered  500,000 shares of the Company's  common stock at a
forward price of $82.32 per share.  The agreement has a term of one year but may
be settled  earlier.  If this agreement were settled on a net share basis at the
September  30, 1998 market price of the  Company's  common stock  ($84.8125  per
share),  the Company  would  receive  approximately  14,700 shares of its common
stock.  During the quarter ended September 30, 1998,  interim premium  totalling
$418,482 were recorded as adjustments to additional paid in capital.

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 September 30, 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)                                12.25%             11.20%
Tier 1 (Tier 1/total risk-based assets)                                                   11.19%              9.84%
Leverage (Tier 1/average total assets less intangibles)                                   12.76%              9.81%

</TABLE>


     During the nine months ended September 30, 1998, the Company paid dividends
on its common stock of $14.3 million, or $0.15 per share. On September 14, 1998,
the Board of Directors of the Company  approved a  three-for-two  stock split in
the form of a stock  dividend  and a fourth  quarter  cash  dividend of $.05 per
share of common stock payable on all shares,  including the shares issued in the
stock split.  The stock and cash  dividends  are payable on December 15, 1998 to
shareholders  of record on December 1, 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
paid to the Company  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  September  14, 1998,  the Board of Directors of the Company  approved a
three-for-two  stock split to be effected in the form of a stock  dividend and a
fourth  quarter cash  dividend of $.05 per share of common stock  payable on all
shares  including  the  shares  issued  in the stock  split.  The stock and cash
dividends are payable on December 15, 1998 to shareholders of record on December
1, 1998.

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

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

          Exhibit 10.1  Appendixes A and B to  Providian  Financial  Corporation
          Stock Ownership Plan, as amended on October 21, 1998

          Exhibit 27.1  Financial Data Schedule.

          (b)  Reports on Form 8-K.

          None.



                                   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: November 13, 1998                   /s/ David J. Petrini
                                          --------------------------------------
                                          David J. Petrini
                                          Senior Vice President, Chief Financial
                                          Officer and Treasurer
                                          (Principal Financial Officer and Duly
                                          Authorized Signatory)


Date: November 13, 1998                   /s/ Daniel Sanford
                                          --------------------------------------
                                          Daniel Sanford
                                          Vice President and Controller
                                          (Chief Accounting Officer and Duly
                                          Authorized Signatory)


<PAGE>

                                  EXHIBIT INDEX


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

Exhibit 10.1   Appendixes A and B to Providian Financial  Corporation Stock
               Ownership Plan, as amended on October 21, 1998

Exhibit 27.1   Financial Data Schedule