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

                                    FORM 10-Q

(Mark One) 
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the quarterly period ended June 30, 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 July 31,  1998,  there  were  95,024,429  shares of the  registrant's
Common Stock, par value $0.01 per share, outstanding.
<PAGE>

                                      



                         PROVIDIAN FINANCIAL CORPORATION
                                    FORM 10-Q

                                      INDEX

                                  June 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...........................................26

          Item 4. Submission of Matters to a Vote of Security Holders.........26

          Item 5. Other Information...........................................27

          Item 6. Exhibits and Reports on Form 8-K............................27

Signatures....................................................................28

                                  
<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements.

<TABLE>

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

<CAPTION>
                                                                                  June 30            December 31
                                                                                    1998                 1997         
<S>                                                                             -----------          -----------
Assets:                                                                         <C>                 <C> 
Cash and cash equivalents                                                       $  145,550          $  112,522
Federal funds sold                                                                 140,470             114,960 
Investment securities at cost (which approximates market value)                    512,445             172,756  
Loans held for securitization or sale                                                -                 450,233
Loans receivable, less allowance for credit losses of $355,789 at 
  June 30, 1998 and $145,312 at December 31, 1997                                4,348,128           2,815,364
Due from securitizations                                                           267,245             472,145
Interest receivable                                                                 86,821              80,434
Premises and equipment, net                                                         72,399              61,625        
Other assets                                                                       229,614             169,374
                                                                                -----------         -----------    
    Total assets                                                                $5,802,672          $4,449,413
                                                                                ===========         ===========      
                                                                                                                
Liabilities:                                  
Deposits:                                                                       $3,731,150          $3,212,766
Term federal funds purchased                                                       420,000             150,000
Notes payable to banks                                                               -                  82,000
Long-term notes payable                                                            399,717                -
Accrued expenses and other liabilities                                             399,705             249,533
                                                                                -----------         -----------  
    Total liabilities                                                            4,950,572           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: June 30, 1998 - 94,986,921 shares;
 December 31, 1997- 95,156,545 shares)                                                 954                 954
Additional paid-in capital                                                           4,690               4,217                  
Retained earnings                                                                  709,306             599,856
Common stock held in treasury - at cost:June 30, 1998 - 438,399 
  shares; December 31, 1997 - 268,775 shares)                                      (22,850)             (9,913)
                                                                                -----------         -----------     
     Total shareholders' equity                                                    692,100             595,114
                                                                                -----------         -----------     
     Total liabilities and shareholders' equity                                 $5,802,672          $4,449,413
                                                                                ===========         =========== 
See notes to condensed consolidated financial statements.
                                        
</TABLE>

<PAGE>

<TABLE>

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

<CAPTION>

                                  Three Months Ended               Six Months Ended
                                      June 30                           June 30
                                 ------------------------     ----------------------- 
                                    1998         1997            1998          1997
                                 ---------   ------------     ---------      --------   
<S>                              <C>         <C>              <C>            <C>
Interest Income:
  Loans                          $ 185,213   $    132,216     $ 355,283      $ 278,541
  Investments Securities             9,007          7,483        15,514         13,329  
                                 ---------   ------------     ---------      ---------  
  Total interest income            194,220        139,699       370,797        291,870

Interest expense:
  Deposits                          48,970         37,955        95,123         81,967
  Borrowings                        12,561          6,366        21,164         12,452
                                 ---------   ------------     ---------      --------- 
  Total interest expense            61,531         44,321       116,287         94,419

     Net interest income           132,689         95,378       254,510        197,451

Provision for credit losses        117,851         38,950       175,507         72,752
                                 ---------   ------------     ---------     ---------- 

    Net interest income after 
    provision for credit 
    losses                          14,838         56,428        79,003        124,699

Non-interest income:
  Loan servicing income            156,677         91,004       270,793        184,826
  Credit product fee income        120,847         43,716       217,255         82,752
  Other                                485            362           664            501
                                 ---------   ------------    ----------     ----------  
                                   278,009        135,082       488,712        268,079

Non-interest expenses:
  Salaries and employee benefits    60,911         37,814       120,645         88,438
  Solicitation                      46,663         39,890        88,275         68,013
  Occupancy, furniture and 
  equipment                         11,088          9,554        22,354         17,799
  Data processing and 
  communication                     22,080         12,053        37,834         23,786
  Other                             48,183         19,817       101,870         53,879
                                 ---------   ------------      --------        -------      
                                   188,925        119,128       370,978        251,915
                                 ---------   ------------    ----------      ---------

     Income before income taxes    103,922         72,382       196,737        140,863

Income tax expense                  41,059         26,658        77,766         51,977
                                 ---------   ------------    -----------     ----------
     Net Income                   $ 62,863   $     45,724    $  118,971      $  88,886
                                 =========   ============    ===========     ==========             

Basic earnings per share          $   0.66           N/A     $     1.26            N/A
                                 =========   ============    ===========     ==========
Earnings per share - 
assuming dilution                 $   0.65           N/A     $     1.23            N/A
                                 =========   ============    ===========     ===========
Dividends paid per share          $   0.05           N/A     $     0.10            N/A
                                 =========   ============    ===========     =========== 

Weighted average common shares
outstanding - basic (000)           94,698           N/A         94,768            N/A
                                 ==========  ============    ===========     ===========
Weighted average shares and
assumed conversions (000)           96,779           N/A         96,661            N/A
                                 ==========  ============    ==========      ==========                           

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

<PAGE>

<TABLE>

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

<CAPTION>

                                                  7.25%                                                        Common
                                                 Cumulative                      Additional                     stock
                                                 Preferred         Common         Paid-In      Retained        Held in
                                                  Stock            Stock          Capital      Earnings        Treasury     Total
                                               ----------        --------         ---------    ----------     ---------   --------
<S>                                            <C>               <C>              <C>          <C>            <C>         <C>     
Balance at 
December 31, 1996                              $      63         $      5         $  63,706     $ 419,370      $  -       $ 483,144
Net Income                                                                                         88,886                    88,886
Redemption of preferred stock                        (63)                           (63,207)                                (63,270)
Net issuance of shares                                                948              (499)        (449)                     -
Reimbursement relating to the 
   conversion of stock options                                                        6,846                                   6,846
Issuance of restricted/unrestricted stock                               1             5,115                                   5,116
Deferred compensation related to 
   grant of restricted and unrestricted
   stock less forfeited shares                                                       (5,116)                                 (5,116)
Cash dividend:
  Preferred - paid to former parent                                                                (1,006)                   (1,006)
                                               ----------        --------         ----------   ------------   ---------   ----------
Balance at June 30, 1997                       $     -           $    954         $   6,845     $ 506,801     $    -      $ 514,600
                                               ==========        ========         ==========   ==========     ==========  ==========

Balance at December 31, 1997                   $     -           $    954          $  4,217     $ 599,856     $  (9,913)  $ 595,114
Net Income                                                                                        118,971                   118,971
Cash dividend:                                                                                                                  
   Common - $0.10 per share                                                                        (9,521)                   (9,521)
Purchase of 357,200 common 
   shares for treasury                                                                3,730                     (24,436)    (20,706)
Exercise of stock options                                                            (5,856)                      8,094       2,238
Issuance of restricted and                                                                                                          
    unrestricted stock less                                                                                                      
    forfeited shares                                                                  1,429                       3,405       4,834
Deferred compensation related to
   grant of restricted and unrestricted                                                                                           
   stock less amortization of $1,842                                                 (3,018)                                 (3,018)
Put warrant premium                                                                   1,325                                   1,325
Net tax effect from exercise of stock options                                                                                   
    and issuance of restricted stock                                                  2,863                                   2,863
                                               ---------         --------           ---------   -----------    ---------     -------
Balance at June 30, 1998                       $    -            $    954          $  4,690     $ 709,306      $(22,850)   $692,100
                                               =========         ========          =========    ===========    ==========  =========

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

<PAGE>

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

<CAPTION>

                                                                                               Six Months Ended
                                                                                                  June 30
                                                                                    ---------------------------------        
                                                                                        1998                  1997
                                                                                    -------------        ------------  
<S>                                                                                 <C>                 <C>                         
Operating Activities:

 Net Income                                                                         $    118,971        $     88,886
 Adjustments to reconcile net income to net cash provided by operating activities:
  Provision for credit losses                                                            175,507              72,752 
  Depreciation and amortization of premises and equipment                                  7,302               7,189
  Amortization of net loan acquisition costs                                              19,741              19,507
  Amortization of discount on sale of loans receivables                                      263                 242 
  Amortization of deferred compensation
   related to restricted and unrestricted stock                                            1,816                -
  (Increase) decrease in deferred income tax benefit                                     (50,108)             18,353
  Increase in interest receivable                                                         (6,387)             (9,192)
  Increase in other assets                                                               (29,873)            (79,221)       
  Increase (decrease) in accrued expenses and other liabilities                          153,035             (11,799)
                                                                                    -------------      --------------
                    Net Cash Provided by Operating Activities                            390,267             106,717
                                                                                                                  

Investing Activities:

 Adjustments to reconcile net income to net cash used by investing activities: 
  Net increase in money market instrument investments                                   (299,480)             (1,050)
  Net cash used for loan originations and principal
    collections on loans receivable                                                     (385,947)           (624,557)
  Net proceeds from securitization of loans                                            1,049,911           1,391,618 
  Portfolio acquisitions                                                              (1,922,265)               - 
  Decrease (increase) in due from securitizations                                        204,900            (123,515)
  Purchases of investment securities                                                     (40,284)           (366,050)
  Proceeds from maturities of investment securities                                           75             219,660
  Increase in federal funds sold                                                         (25,510)           (107,450)
  Net purchases of premises and equipment                                                (18,076)            (12,483)
                                                                                    -------------       -------------
                    Net Cash (Used) Provided by Investing Activities                  (1,436,676)            376,173   


Financing Activities:

 Adjustments to reconcile net income to net cash provided by financing 
  activities:
  Net increase (decrease) in deposits                                                    518,384            (547,290)
  Proceeds from issuance of term federal funds                                           450,000             244,000
  Repayment of term federal funds                                                       (180,000)           (116,000)    
  (Decrease) increase in notes payable to banks                                          (82,000)             33,000
  Decrease in note payable to affiliates                                                     -               (42,500)
  Increase (decrease) in long-term notes payable                                         399,717             (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                                                             (20,706)               -
  Put warrant premium                                                                      1,325                -   
  Dividend paid                                                                           (9,521)             (1,006)
  Proceeds from exercise of stock options                                                  2,238                - 
                                                                                -----------------       --------------
                   Net Cash Provided (Used) by Financing Activities                    1,079,437            (376,220)
                                                                                -----------------       --------------

Net Increase in Cash and Cash Equivalents                                                 33,028             106,670
Cash and Cash Equivalents at beginning of year                                           112,522              82,946
                                                                                -----------------     ---------------
Cash and Cash Equivalents at end of period                                      $        145,550        $    189,616
                                                                                =================     ===============
                                                                             
See notes to condensed consolidated financial statements.
</TABLE>
                
<PAGE>

PROVIDIAN FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements
June 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 six months ended
June 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 quarter ending June 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 quarter  ended June 30, 1997,  have been computed by dividing net income
reported  for the  period by the pro  forma  weighted  average  number of common
shares outstanding for the applicable period.

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

<PAGE>

                         Three months ended June 30     Six months ended June 30
(In thousands, 
except per share data)          1998          1997 (1)       1998       1997 (1)
--------------------------------------------------------------------------------
Income available to          $62,863        $45,724       $118,971       $88,886
common stockholders          ===================================================


Weighted average shares
outstanding--Basic            94,698         94,991         94,773        94,559
Effect of dilutive securities
 Restricted Stock issued--
 non vested                      373             42            350            21
 Employee stock options        1,708            337          1,538           469
                              --------------------------------------------------
Dilutive potential 
 common shares                 2,081            379          1,888           490
                             -------------------------   -----------------------
Adjusted weighted average 
 shares and assumed 
 conversions                  96,779          95,371        96,661        95,049
                              ==================================================

Earnings per share             $0.66           $0.48         $1.26         $0.94
                              ==================================================

Earnings per share--
assuming dilution              $0.65           $0.48         $1.23         $0.94
                              ==================================================

(1)  Earnings  per share for the three and six months  ended  June 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 six 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 six months ended
June 30, 1998 and 1997 is as follows (in thousands):

                                                        Six Months Ended June 30
                                                            1998         1997
--------------------------------------------------------------------------------
Balance at beginning of period                          $  145,312   $  114,540
Provision for credit losses                                175,507       72,752
Reserve acquired                                           178,959           -
Charge-offs                                               (155,915)     (62,733)
Recoveries                                                  11,926        5,184
                                                       -------------------------
Net charge-offs                                           (143,989)     (57,549)
                                                       -------------------------
Balance at end of period                               $   355,789   $  129,743
                                                       =========================

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 six months ended
June 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,
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  (lower)  than the forward  purchase  price,  the net
differential  is  received  (paid)  by the  Company.  As of June 30,  1998,  the
agreement  covered  451,863  shares of the  Company's  common stock at a forward
price of  $77.92  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 June
30, 1998 market  price of the  Company's  common stock  ($78.56 per share),  the
Company would receive  approximately  3,700 shares of its common stock.  In June
1998,  settlement  of the  agreement  resulted in the Company  receiving  48,137
shares of its common stock, which were recorded as treasury shares.

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 products  offered by the Company
include  unbanked  products  ("Unbanked  Products"),   primarily  consisting  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.
The Company also offers deposit  products to customers  nationwide.  The primary
factors affecting the  profitability of the Company's  consumer products are the
number of customer accounts and outstanding loan balances, net interest margins,
credit  usage,  level  of  fee  income,   credit  quality,   and  the  level  of
solicitation, servicing, and other expenses.

Forward-Looking Statements

     Certain  statements  contained herein include  forward-looking  information
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended,  and are subject
to the "safe  harbor"  created  by those  sections.  Forward-looking  statements
include  expressions  of  the  "belief,"  "anticipation"  or  "expectations"  of
management,  statements  as  to  industry  trends  or as to  future  results  of
operations of the Company,  and other  statements which are not historical fact.
Undue   reliance   should   not  be   placed  on   forward-looking   statements.
Forward-looking   statements   are  not   guarantees   of  future   performance.
Forward-looking  statements  are based on certain  assumptions by management and
are subject to risks and uncertainties that could cause actual results to differ
materially  from  those  in the  forward-looking  statements.  These  risks  and
uncertainties  include,  but are not  limited  to,  competition,  delinquencies,
credit losses,  outside vendor  relationships,  funding costs and  availability,
general  economic  conditions,  government  policy  and  regulations,  and risks
related to growth, product development,  acquisitions and operations.  These and
other risks and  uncertainties are described in the Company's 1997 Annual Report
on Form 10-K under the heading  "Cautionary  Statements." The Company undertakes
no obligation  to update any  forward-looking  statements  to reflect  events or
circumstances after the date hereof.

Earnings Summary

     Net income for the quarter ended June 30, 1998 was $62.9 million,  or $0.65
per diluted share,  compared to net income of $45.7 million,  or $0.48 pro forma
per diluted  share,  for the quarter ended June 30, 1997. Net income for the six
months  ended  June 30,  1998 was $119  million,  or $1.23  per  diluted  share,
compared to net income of $88.9  million,  or $0.94 pro forma per diluted share,
for the first six 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 quarter  ended June 30, 1997 and prior periods
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
growth in managed loans  outstanding,  higher year to date net interest  margins
and  increased  non-interest  income,  offset by higher  net  credit  losses and
increased  non-interest  expenses.  Average managed loans outstanding  increased
from $9.2 billion for the quarter  ended June 30, 1997 to $11.3  billion for the
quarter  ended June 30, 1998,  reflecting  the impact of marketing  and customer
activation  efforts  combined  with the  Portfolio  Acquisitions.  End of period
managed  loans  receivable  increased  from $9.2  billion as of June 30, 1997 to
$11.5 billion as of June 30, 1998.  On-balance  sheet loans also  increased year
over year to $4.7  billion as of June 30,  1998,  compared to $2.9 billion as of
June 30, 1997.

     From December 31, 1997 to June 30, 1998,  total  managed loans  outstanding
increased from $9.9 billion to $11.5 billion,  reflecting new customer  balances
realized from  marketing  activity,  activation  of existing  customers and loan
Portfolio  Acquisitions  offset by balance  attrition due to payments and credit
loss activity.  The Company added 2.6 million new customer  accounts  during the
six months ended June 30,  1998.  This number  includes  new  accounts  from the
Portfolio Acquisitions and excludes customer attrition. These new accounts added
to the Company's customer base for fee-based product sales.

     Return on average total managed  assets for the three months ended June 30,
1998 was 1.92%,  compared to 1.71% for the same period during 1997. The 21 basis
point  increase  in return on assets is  primarily  due to higher  net  interest
margins driven by growth in Unbanked Product accounts and to increased fee-based
product and other fee  income.  Return on average  shareholders'  equity for the
three  months  ended June 30, 1998 was  37.91%,  compared to 37.60% for the same
period in 1997,  reflecting the increased return on average total managed assets
for the period,  offset by a higher ratio of average  equity to average  managed
assets.

Managed Loan Portfolio

     The  Company's  consumer  loan  products  include  unsecured  credit cards,
revolving lines of credit,  home loans, and secured and partially secured credit
cards.  Since  1989,  the  Company  has  securitized  unsecured  credit card and
revolving  lines of credit and,  beginning in 1996, home equity lines of credit.
During the six months ended June 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>
---------------------------------------------------------------------------------------------------------
                                      TABLE 1-MANAGED CONSUMER LOAN PORTFOLIO INFORMATION
----------------------------------------------------------------------------------------------------------
<CAPTION>


                                                     Three Months Ended                Six Months Ended
                                                           June 30                          June 30
                                                  -------------------------     --------------------------
(Dollars in thousands)                                1998          1997            1998           1997
                                                  ----------   ------------     -------------  -----------   

<S>                                               <C>          <C>              <C>    
Period-End Balances:
On-balance sheet consumer loans                   $ 4,703,917  $ 2,864,782      $  4,703,917   $ 2,864,782   
Securitized consumer loans                          6,791,054    6,379,953         6,791,054   $ 6,379,953
                                                  ------------ ------------     -------------  -----------  
 Total managed consumer loan portfolio            $11,494,971  $ 9,244,735      $ 11,494,971   $ 9,244,735
                                                  ===========  ============     =============  ===========  

Average Balances:
On-balance sheet consumer loans                   $ 4,398,017  $ 2,906,059      $  4,190,478   $ 3,215,173  
Securitized consumer loans                          6,860,743    6,296,037         6,710,255     5,962,948 
                                                  ------------  -----------     -------------  ----------- 
 Total average managed consumer loan portfolio    $11,258,760  $ 9,202,096      $ 10,900,733   $ 9,178,121 
                                                  ============  ===========     =============  =========== 
Operating Data and Ratios:
Reported:
    Average earning assets                        $ 5,021,452   $3,443,945      $  4,730,898   $ 3,708,683
    Return on average assets                            4.48%        4.51%             4.41%         4.21%
    Net interest margin (1)                            10.57%       11.08%            10.76%        10.65%
Managed:
    Average earning assets                        $11,882,195   $9,739,982      $ 11,441,153   $ 9,671,631     
    Return on average assets                            1.92%        1.71%             1.88%         1.71%
    Net interest margin (1)                            10.79%       10.47%             7.12%         6.87%


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

<PAGE>


     The Company  services the accounts  underlying  the  securitized  loans and
earns a stated monthly servicing fee, which is generally offset by the servicing
costs incurred by the Company.  The finance charge and fee revenue  generated by
the securitized  loans, in excess of interest paid to investors,  related credit
losses,  servicing fee, credit enhancement costs and other program expenses,  is
referred to as excess servicing income.  Revenue resulting from excess servicing
income is recognized  first as a reduction of the interest only strip receivable
and, to the extent the amount  received  exceeds the  related  component  of the
interest only strip  receivable  (which was recorded at present value),  as loan
servicing income.  The effect of this treatment is to reduce net interest income
and the provision for credit losses, and to increase non-interest income, on the
Company's  statement  of income.  For the three  months  ended June 30, 1998 and
1997,  as a result of  securitization,  the  Company's  net interest  income was
reduced by $187.9 million and $159.6  million,  respectively;  the provision for
credit losses was reduced by $127.6  million and $123.3  million,  respectively;
and  non-interest  income was  increased  by $60.3  million  and $36.3  million,
respectively.  For the six months  ended June 30, 1998 and 1997,  as a result of
securitization,  the Company's net interest income was reduced by $356.2 million
and $300.5 million, respectively; the provision for credit losses was reduced by
$247.3 million and $232.8 million,  respectively;  and  non-interest  income was
increased by $108.9 million and $67.7 million, respectively.


Net Interest Income

     Net  interest  income  represents  the interest  earned from the  Company's
on-balance  sheet consumer loans less the related  interest  expense  related to
deposits and borrowings.  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 second quarter of 1998 totaled $132.7 million,
compared  to  $95.4  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 the  balances  acquired  in the  Portfolio
Acquisitions.  Interest  expense as a  percentage  of  average  interest-bearing
liabilities  increased 4 basis points for the second quarter of 1998 compared to
the second  quarter  of 1997.  The  annualized  net  interest  margin on average
earning assets for the second quarter of 1998 was 10.57%, compared to 11.08% for
the same period in the prior year,  reflecting lower yields, as mentioned above,
combined with higher average equity as a percentage of assets during 1998.

     On a managed loan basis,  managed net interest income for the quarter ended
June 30, 1998 was $320.6  million,  compared to $255 million for the same period
in 1997, an increase of $65.6 million, or 25.7%. The managed net interest margin
on average  managed  loans  increased  to 11.46% for the quarter  ended June 30,
1998,  from 11.16% for the  quarter  ended June 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 six month periods ended June 30, 1998 and 1997:

<TABLE>

----------------------------------------------------------------------------------------------------------------------------
                             TABLE 2-STATEMENTS OF AVERAGE BALANCES, INCOME AND EXPENSE, YIELDS AND RATES
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                 Three Months Ended June 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                 $ 4,398,017      $  185,213            16.85%  $ 2,906,059      $ 132,216        18.20%
    Interest-earning cash               22,095             299             5.41%      108,836          1,482         5.45% 
    Federal funds sold                 220,394           3,042             5.52%      294,670          4,106         5.57%
    Investment securities              380,946           5,666             5.95%      134,380          1,895         5.64%
                                     ----------      ---------      ------------  ------------   -----------        ------
Total interest-earning               5,021,452       $ 194,220            15.47%    3,443,945      $ 139,699        16.23%
assets                   

Allowances for loan losses            (300,638)                                      (124,973)
Other assets                           894,863                                        738,040
                                   ------------                                 --------------   
Total assets                       $ 5,615,677                                    $ 4,057,012    
                                   ============                                 ============== 

LIABILITIES AND EQUITY:

Interest-bearing liabilities
    Deposits                       $ 3,588,554       $ 48,970              5.46%  $ 2,825,265      $  37,955           5.37%
    Borrowings                         826,600         12,561              6.08%      381,540          6,366           6.67%    
                                   -----------         -------       -----------  ------------     -----------      ---------- 
Total interest-bearing liabilities   4,415,154       $ 61,531              5.57%    3,206,805      $  44,321           5.53% 

Other liabilities                      377,171                                        203,803
                                   -----------                                    ------------
Total liabilities                    4,792,325                                      3,410,608   

Capital securities                     160,000                                        160,000 

Equity                                 666,352                                        486,404
                                   ------------                                   ------------  
Total liabilities and equity       $ 5,615,677                                    $ 4,057,012     
                                   ============                                   ============ 
NET INTEREST SPREAD:                                                       9.90%                                      10.70%
                                                                          ======                                      ======

Interest income to
    average interest-earning assets                                       15.47%                                      16.23%
Interest expense to 
    average interest-earning assets                                        4.90%                                       5.15%
                                                                          ------                                   ----------
NET INTEREST MARGIN                                                       10.57%                                      11.08% 
                                                                         =======                                  ============     



                                                      Six Months Ended June 30
                                   ----------------------------------------------------------------------------------------- 
(Dollars in thousands)                        1998                                        1997
                                   -----------------------------------------    --------------------------------------------   
                                   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                 $ 4,190,478      $  355,283            16.96%  $ 3,215,173      $ 278,541          17.33%
    Interest-earning cash               31,477             855             5.43%      104,205          2,771           5.32% 
    Federal funds sold                 215,936           5,945             5.51%      302,192          8,167           5.41%
    Investment securities              293,007           8,714             5.95%       87,113          2,391           5.49%
                                     ----------      ---------      ------------  ------------   -----------          ------
Total interest-earning               4,730,898       $ 370,797            15.68%    3,708,683      $ 291,870          15.74%
assets                   

Allowances for loan losses            (266,193)                                      (121,142)
Other assets                           927,135                                        633,102
                                   ------------                                 --------------   
Total assets                       $ 5,391,840                                    $ 4,220,643    
                                   ============                                 ============== 

LIABILITIES AND EQUITY:

Interest-bearing liabilities
    Deposits                       $ 3,507,344       $ 95,124              5.42%  $ 3,040,706      $  81,967           5.39%
    Borrowings                         707,600         21,163              5.98%      391,213         12,452           6.37%    
                                   -----------         -------       -----------  ------------     -----------         ------      
Total interest-bearing liabilities   4,214,944       $116,287              5.52%    3,431,919      $  94,419           5.50% 

Other liabilities                      374,725                                        167,566
                                   -----------                                    ------------
Total liabilities                    4,589,699                                      3,599,485   

Capital securities                     160,000                                        129,945 

Equity                                 642,171                                        491,213
                                   ------------                                   ------------  
Total liabilities and equity       $ 5,391,840                                    $ 4,220,643     
                                   ============                                   ============ 
NET INTEREST SPREAD:                                                      10.16%                                      10.24%
                                                                          ======                                     =======

Interest income to
    average interest-earning assets                                       15.68%                                      15.74%
Interest expense to 
    average interest-earning assets                                        4.92%                                       5.09%
                                                                          ------                                   ---------
NET INTEREST MARGIN                                                       10.76%                                      10.65% 
                                                                         =======                                  ==========     

</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  June 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 June 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                   Six Months Ended
                                                           June 30                             June 30
                                                           1998 vs. 1997                       1998 vs. 1997                 
                                         ----------------------------------       ---------------------------------------- 
                                       Increase       Change due to (1)           Increase          Change due to (1)      
                                       (Decrease)       Volume      Rate          (Decrease)        Volume      Rate
(Dollars in thousands)                  ---------     ---------   -------         ----------     --------    ----------   

<S>                                     <C>           <C>         <C>              <C>           <C>         <C>   
Interest Income:
Consumer loans                         $ 52,997       $114,865    $(61,868)        $76,742       $93,923     $(17,181)
Federal funds sold                       (1,064)        (1,027)        (37)         (2,222)       (2,654)         432
Other securities                          2,588          2,489          99           4,407         4,022          385 
                                        ---------      ----------  ---------        --------      --------    ---------- 
  Total interest income                  54,521        116,327     (61,806)         78,927        95,291      (16,364)  

Interest Expense:
Deposits                                 11,015         10,372         643          13,157        12,697          460 
Borrowings                                6,195          9,943      (3,748)          8,711        10,935       (2,224)   
                                       ---------     ----------   ----------       --------       ------     -----------    
  Total interest expense                 17,210         20,315      (3,105)         21,868        23,632       (1,764) 
                                       ---------     ----------   ----------       --------      -------     -----------
  Net interest income                  $ 37,311       $ 96,012    $(58,701)        $57,059       $71,659     $(14,600)   
                                       =========      =========   ==========       ========      =======     ===========  

(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  59% of gross on-balance sheet revenues for the three months ended
June 30, 1998, compared to approximately 49% for the three months ended June 30,
1997.  For the six months ended June 30, 1998 and 1997,  fee income  represented
57% and 48%,  respectively,  of gross on-balance sheet revenues. The increase in
non-interest income resulted from higher loan servicing income, due primarily to
higher average securitized assets and increased sales of fee-based products.

Loan Servicing Income

     Average  securitized  loans,  which are  reduced by  principal  collections
accumulated in principal  funding accounts prior to being paid to securitization
investors,  were $6.9  billion  during the three  months  ended  June 30,  1998,
compared  to $6.3  billion  for the same period of 1997,  a 10%  increase.  Loan
servicing  income  increased 72%, to $156.7 million,  for the quarter ended June
30,  1998,  compared to $91  million  for the same  period in 1997.  For the six
months ended June 30, 1998,  loan servicing  income  increased  46.5%, to $270.8
million,  from $184.8  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 $2.2
million and $50.4  million  during the six months  ended June 30, 1998 and 1997,
respectively.  The decrease reflects the impact of SFAS No. 125 during the first
six 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  176.4%,  to $120.8  million,  for the
quarter  ended  June 30,  1998,  compared  to $43.7  million  for the prior year
quarter.  For the six months  ended June 30,  1998,  credit  product  fee income
increased 162.5%,  to $217.3 million,  from $82.8 million for the same period in
1997.  These increases  resulted from increased  customer volume for credit card
membership and  processing  fees,  increased  income from sales of the Company's
fee-based products and an increase in late, overlimit and cash advance fees.

Non-Interest Expense

     Non-interest  expense for the three  months  ended June 30, 1998 was $188.9
million, an increase of 59% over non-interest  expense of $119.1 million for the
same period in the prior year.  Salaries and employee  benefits  increased $23.1
million,  or 61%, to $60.9  million for the three  months  ended June 30,  1998,
compared to $37.8  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  $46.7  million for the quarter ended June 30,
1998, a 17% increase  over the prior year quarter total of $39.9  million.  This
increase in  solicitation  costs  resulted  from an increased  investment in the
direct  mail and  direct  telemarketing  acquisition  channels  and  from  other
initiatives designed to improve customer activation and retention.

     The "Year 2000"  problem is a result of computer  systems  using two digits
rather than four digits to define the  applicable  year.  The Company is heavily
dependent upon computer systems for all of its operations. The Company processes
data  through  its own systems and obtains  data and  processing  services  from
various  vendors.  The Company  has  launched a Year 2000  Project to  identify,
assess and, where  appropriate,  modify internal and vendor systems with respect
to Year 2000  problems.  The Year 2000 Project team is currently  assessing  the
Company's internal systems and the systems of its material vendors for Year 2000
compliance and such assessment is substantially  complete. The Company's goal is
to complete the Year 2000 Project testing and system  modifications  by June 30,
1999. The Company  believes that it has adequate  resources to achieve Year 2000
compliance for its internal systems and that it is taking  appropriate  steps to
identify exposure to Year 2000 problems with its material vendors.

     The Company's total Year 2000 Project costs are expected to be no more than
$10 million and the Company has incurred approximately $4.8 million in Year 2000
Project  expenses  to date.  The  Company  believes  that the costs of Year 2000
compliance  will not have a material  impact on the Company's  future  financial
results or  condition.  However,  if the Year 2000 Project is not completed on a
timely basis or is not fully  effective,  these issues could have a  significant
adverse  economic  impact on the  Company's  financial  results  and  condition.
Management's  estimates for the Year 2000 Project  completion date and Year 2000
Project  compliance  costs are based on assumptions  about future events and are
subject to risks and uncertainties.  These include the continued availability of
trained  personnel,  the  Company's  ability to identify  and  correct  software
problems  and the ability of its vendors to achieve  Year 2000  compliance  on a
timely basis.

Income Taxes

     The  Company's  income tax expense,  which  includes both state and federal
taxes,  was $41.1 million for the three months ended June 30, 1998,  compared to
$26.7  million for the three  months ended June 30,  1997.  The overall  current
effective  income  tax rate of 39.5%  reflects  an  increase  in state tax rates
associated with the Spinoff.

Asset Quality

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

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

     The  Company's  policy  is to  recognize  principal  credit  losses  on all
unsecured loans (including the unsecured portion of any partially secured credit
card loans) which become  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 determination of uncollectibility.  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 June 30, 1998 and 1997:

<TABLE>
<CAPTION>

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

                                               June 30
                       ---------------------------------------------------------
                              1998                               1997
                       ------------------------  -----------------------------   
                                        % of                             % of
                                        Total                            Total
(Dollars in thousands) Loans            Loans         Loans              Loans
                       ---------       --------       -----------        -----     
<S>                    <C>             <C>            <C>                <C>

Reported: (1)
Loans outstanding      $ 4,703,917      100.00%       $ 2,864,782        100.00%
Loans delinquent:               
 31 - 60 days               97,953        2.08%            53,282          1.86%
 61 - 90 days               59,866        1.27%            30,320          1.06%
 91 or more days           125,012        2.66%            61,124          2.13%
                       -----------      -------       -----------        -------
Total                  $   282,831        6.01%       $   144,726          5.05%
                       ===========      =======       ===========        =======

Managed:
Loans outstanding      $11,494,971      100.00%       $ 9,244,735        100.00%
Loans delinquent:               
 31 - 60 days              197,108        1.72%           153,938          1.67%
 61 - 90 days              122,841        1.07%            86,473          0.94%
 91 or more days           242,933        2.11%           163,606          1.77%
                       -----------      -------       -----------        -------
Total                  $   562,882        4.90%       $   404,017          4.37%
                       ===========      =======       ===========        =======   

(1) Includes loans held for securitization.

</TABLE>


     The managed loan delinquency  rate as of June 30, 1998 was 4.90%,  compared
to 4.22% as of December 31, 1997 and 4.37% as of June 30, 1997.  The increase in
the managed loan  delinquency  rate over the prior  quarter  reflects the higher
rates  of  delinquency  associated  with the  loans  acquired  in the  Portfolio
Acquisitions.   Excluding  the  effect  of  the  Portfolio   Acquisitions,   the
delinquency  rate at June 30,  1998 would  have been  4.26% pro forma,  slightly
above the  delinquency  rate at December  31,  1997.  The  delinquency  rate for
on-balance  sheet loans was 6.01% as of June 30,  1998,  compared to 4.17% as of
December 31, 1997 and 5.05% as of June 30, 1997. This 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, which are written off as a reversal of current earnings
at the time of credit loss  recognition.  Losses from  fraudulent  activity  are
included in non-interest expenses.

     The following  table  presents the Company's net credit losses for consumer
loans for the three and six months ended June 30, 1998 and 1997:

<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------   
                                        TABLE 5 - NET CREDIT LOSSES
---------------------------------------------------------------------------------------------------------------

                                             Three Months Ended June 30             Six Months Ended June 30
(Dollars in thousands)                       1998                1997                 1998          1997                 
                                         -----------        --------------        ------------   ----------   
<S>                                      <C>                <C>                   <C>             <C>
Reported: (1)
Average loans outstanding                $ 4,398,017        $ 2,906,059           $ 4,190,478     $ 3,215,173 
Net charge-offs                          $    85,094        $    28,465           $   143,989     $    57,549
Net charge-offs as
  a percentage of average
  loans outstanding                            7.74%              3.92%                 6.87%           3.58%

Managed:
Average loans outstanding                $11,258,760        $ 9,202,096           $10,900,733     $ 9,178,121
Net charge-offs                          $   212,696        $   151,711           $   391,214     $   290,312
Net charge-offs as 
  a percentage of average
  loans outstanding                            7.56%              6.59%                 7.18%           6.33%
 
(1) Includes loans held for securitization.

</TABLE>


     The managed net credit loss rate for the three  months  ended June 30, 1998
was 7.56%,  compared to 6.78% for the quarter ended March 31, 1998 and 6.59% for
the quarter ended June 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.  Excluding the impact of the Portfolio Acquisitions,  the
credit loss rate for the  quarter  ended June 30, 1998 would have been 6.36% pro
forma, a decrease from the prior quarter pro forma net credit loss rate of 6.49%
and reflective of the industry wide trend in consumer  credit  performance  over
the prior year quarter.

Allowance and Provision for Possible Credit Losses

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

     The  following  table sets forth the activity in the allowance for possible
credit losses for the three and six months ended June 30, 1998 and 1997:

<TABLE>

-------------------------------------------------------------------------------------------------------------------
                           TABLE 6 - SUMMARY OF ALLOWANCE FOR CREDIT LOSSES
-------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                            Three Months Ended                         Six Months Ended
                                                 June 30                                   June 30  
(Dollars in Thousands)                   1998              1997                      1998            1997                 
                                        --------      ----------                -----------      --------- 
                                           
<S>                                     <C>           <C>                       <C>              <C>  
Balance at beginning 
of period                               $ 249,440     $ 119,258                 $  145,312       $ 114,540
Provision for credit losses               117,851        38,950                    175,507          72,752 
Reserve acquired                           73,592         -                        178,959            -
Charge-offs                               (91,495)      (32,140)                  (155,915)        (62,733)  
Recoveries                                  6,401         3,675                     11,926           5,184
                                        ----------    ----------               -----------      ----------  
Net charge-offs                           (85,094)      (28,465)                  (143,989)        (57,549)
                                        ----------    ----------                -----------     ---------- 
Balance at end of period                $ 355,789     $ 129,743                 $  355,789       $ 129,743                     
                                        ==========    ==========                ===========      ========== 
Allowance for credit losses
to loans at period-end (1)                   7.56%         4.78%                      7.56%           4.78%

(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
June 30, 1998:
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                   TABLE 7 - CONTRACTUAL MATURITIES OF DEPOSIT
----------------------------------------------------------------------------------------------------------------------------
                                                          June 30, 1998                    June 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                   $ 295,621       $235,773       $  531,394  $  254,690     $115,537      $  370,227
Over three months
through 12 month                         749,287        361,705        1,110,992     577,769      216,544         794,313 
Over one year through 
five years                               521,947        580,550        1,102,497     394,355      402,157         796,512  
Deposits without  
contractual maturity                     921,111         65,156          986,267     822,262       59,508         881,770
                                      ----------     ------------     ----------  --------------------------------------- 
   Total Deposits                     $2,487,966     $1,243,184       $3,731,150 $ 2,049,076     $793,746      $2,842,822
                                     ====================================================================================         
</TABLE>

                         

     Deposits  increased  from $3.2  billion  as of  December  31,  1997 to $3.7
billion as of June 30, 1998. 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 June 30, 1998 was
$12.6  million,  compared to $6.4  million for the quarter  ended June 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 June 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.

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

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

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

     The  securitization  of  consumer  loans  is a  significant  source  of the
Company's funding.  Commercial paper-based conduit facilities and other variable
funding  facilities  are  used to  securitize  certain  unsecured,  secured  and
partially secured credit card,  revolving line of credit and home equity line of
credit card  receivables.  As of June 30, 1998,  the Company had $2.3 billion of
outstanding   securitized   loans  under  such  conduit  and  variable  funding.
Outstanding term  securitizations  under the Company's master trust totaled $4.5
billion  as of  June  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 quarter ended
June 30, 1998,  accumulation  of principal for previously  securitized  loans of
$837.9 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 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>
----------------------------------------------------------------------------------------------
                       TABLE 8 - SUMMARY OF INTEREST RATE SWAPS/CAPS
----------------------------------------------------------------------------------------------
<CAPTION>
                                       Three Months Ended              Six Months Ended
                                           June 30                          June 30
(Dollars in thousands)                 1998         1997               1998          1997                 
                                      -------    -----------        -------      ---------- 
                                   
<S>                                   <C>        <C>                <C>          <C>

Interest rate swap agreements:
     Beginning Balance               $ 955,500    $ 1,090,500        $ 955,500     $ 1,290,500
     Additions                          66,667         30,000          166,667          63,333 
     Maturities                        886,667        165,000          986,667         398,333
                                     ---------       --------        ---------       ---------  
     Ending Balance                  $ 135,500    $   955,500        $ 135,500     $   955,500
                                     =========     ==========        =========       ========= 

Interest rate caps and floors:
     Beginning Balance               $ 709,470     $1,459,950        $ 922,220     $ 1,522,450
     Additions                         332,500         -               322,500           -
     Maturities                        350,000        112,750          562,750         175,250
                                   -----------     ----------        ---------       ---------  
     Ending Balance                  $ 691,970     $1,347,200        $ 691,970     $ 1,347,200    
                                   ===========     ==========        =========      ========== 
                             
</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,
commercial paper, interest bearing deposits with other banks, federal funds sold
and other cash equivalents.  Investment securities increased from $172.8 million
as of December  31, 1997 to $512.4  million as of June 30, 1998.  Federal  funds
sold increased from $115.0 million to $140.5 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,
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  (lower)  than the forward  purchase  price,  the net
differential  is  received  (paid)  by the  Company.  As of June 30,  1998,  the
agreement  covered  451,863  shares of the  Company's  common stock at a forward
price of  $77.92  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 June
30, 1998 market  price of the  Company's  common stock  ($78.56 per share),  the
Company would receive  approximately  3,700 shares of its common stock.  In June
1998,  settlement  of the  agreement  resulted in the Company  receiving  48,137
shares of its common stock, which were recorded as treasury shares.

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  June  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)              12.65%             16.94%
Tier 1 (Tier 1/total risk-based assets)                                 11.58%             15.55%
Leverage (Tier 1/average total assets less intangibles)                 13.15%             10.68%

</TABLE>
     
     On May 6, 1998, the Board of Directors of the Company  approved a quarterly
dividend of $.05 per share payable on June 15, 1998 to shareholders of record on
June 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
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 4.  Submission of Matters to a Vote of Security Holders.

         (a)  The 1998 Annual Meeting of Stockholders was held on May 6, 1998.

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

              James V. Elliott
              Lyle Everingham
              J. David Grissom

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

              John M. Cranor III (resigned effective July 1, 1998)
              Christina L. Darwall
              Ruth M. Owades
              John L. Weinberg
              Shailesh J. Mehta
              F. Warren McFarlan
              Larry D. Thompson

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

         Election of Directors               Votes For            Votes Withheld
         ---------------------               -----------         ---------------
         James V. Elliott                    81,103,850                  930,367
         Lyle Everingham                     81,103,960                  930,257
         J. David Grissom                    79,854,903                2,179,314

Item                                 Votes For       Votes Against       Abstain
----------                           ----------      ---------------  ----------
Adoption of the Company's 1997
Employee Stock Purchase Plan          76,559,193        5,163,389        311,635

Ratification of the Selection of
Ernst & Young LLP as independent
auditors of the Company for 1998      81,872,194           37,732        124,291

No other matter was voted upon at such meeting.


Item 5.  Other Information.

     Effective  July 1, 1998,  John M. Cranor III  resigned as a director of the
Company.

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

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

         Exhibit 10.1  Providian Financial Corporation Stock Ownership Plan, as 
                       amended on June 23, 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: August 14, 1998                     /s/ David J. Petrini
                                          -------------------------------
                                          David J. Petrini
                                          Senior Vice President, Chief Financial
                                          Officer and Treasurer
                                          (Principal Financial Officer and Duly
                                          Authorized Signatory)


Date: August 14, 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               Providian Financial Corporation Stock Ownership Plan,
                           as amended on June 23, 1998

Exhibit 27.1               Financial Data Schedule