Providian Cuts Profit Outlook for the Year; Stock Tumbles

Providian Financial Corp. cut its earnings estimates for the year and lowered its long-term growth target Tuesday, triggering a 22% slide in its stock price as the credit card issuer’s credibility with investors suffered another blow.

Shares of the San Francisco-based company, which cited slower consumer sales, softer loan demand and ongoing credit tightening for its lowered outlook, closed down $8.70, or 22%, at $30.36 on the New York Stock Exchange, falling through an 18-month low.

Shares of rivals Capital One Financial Corp. and MBNA Corp. also closed down more than 5%.

Providian, which specializes in lending to people with poor credit, said it expected 2002 results to fall short of its new long-term goal of 15% growth in earnings per share. The company’s announcement called into question whether it could pitch to customers with better credit ratings, which it has been trying to do for much of the year, said Todd Pitsinger, an analyst with Friedman, Billings, Ramsey Group Inc.

The company said it expected to post 2001 earnings of $3.20 to $3.25 a share, slightly below its previous estimate of $3.20 to $3.40 but an increase of 17% to 19% over last year, before one-time adjustments. Analysts polled by research firm Thomson Financial/First Call have expected the company to post earnings of $3.15 to $3.37, with a mean estimate of $3.28.

Providian said it expects to report third-quarter earnings of 82 cents to 84 cents a share and a loan-loss rate lower than its second quarter rate of 10.29%. Analysts were expecting earnings of 80 cents to 88 cents a share, with a mean estimate of 82 cents.