Providian Investor Day

1
Morgan Stanley Convertible ConferenceSeptember
24, 2003
2
Forward Looking Information

• Certain statements contained in this presentation
  are forward-looking statements within the
  meaning of Section 27A of the Securities Act of
  1933, as amended, and Section 21E of the
  Securities Exchange Act of 1934, as amended, and
  are subject to the safe harbor created by those
  sections. Forward-looking statements include
  expressions of belief, anticipation, or
  expectations of management, statements as to
  industry trends or future results of operations
  of the Company, and other statements that are not
  historical fact. Forward-looking statements are
  based on certain assumptions by management and
  are subject to risks and uncertainties that could
  cause actual results to differ materially from
  those in the forward-looking statements. These
  risks and uncertainties include, but are not
  limited to competitive pressures factors that
  affect liquidity, delinquency rates, credit loss
  rates and charge-off rates general economic
  conditions consumer loan portfolio growth
  changes in the cost and/or availability of
  funding due to changes in the deposit, credit or
  securitization markets, changes in the way in
  which the Company is perceived in such markets,
  and/or conditions relating to existing or future
  financing commitments the effects of government
  policy and regulation, whether of general
  applicability or specific to the Company,
  including restrictions and/or limitations on the
  Companys minimum capital requirements, deposit
  taking abilities, reserve methodologies, dividend
  policies and payments, growth, and/or
  underwriting criteria year-end audit
  adjustments changes in accounting rules,
  policies, practices and/or procedures the
  success of product development efforts legal and
  regulatory proceedings, including the impact of
  ongoing litigation interest rates acquisitions
  one-time charges extraordinary items the
  ability to attract and retain key personnel and
  the impact of existing, modified or new strategic
  initiatives. These and other risks and
  uncertainties are described in detail in the
  Companys Annual Report on Form 10-K and Annual
  Report to Stockholders for the fiscal year ended
  December 31, 2002 under the headings Cautionary
  Statement Regard Forward-Looking Informationand
  Risk Factors. You are cautioned not to place
  undue reliance on any forward-looking statement,
  which speaks only as of the date thereof. The
  Company undertakes no obligation to update any
  forward-looking statements.

3
Providian Financial Corporation

• Top ten bankcard issuer
• Managed receivables of approximately 17.8 B
• Over 11 MM customer accounts
• Over 5,600 employees in 9 locations across the
  U.S.
• Restructuring timeline
• Late-2001 implemented 5-point plan began
  assembling new management team
• 2002 developed 3-year capital plan that was
  accepted by regulators significantly
  restructured the portfolio resulting in enhanced
  liquidity capital stabilized credit trends
• Mid-2003 credit trends improving launch of
  new middle America marketing focus

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4
New Management Team
5
Industry Ranking

• Providian is smaller as a result of restructuring
  initiatives, but still remains among the nations
  top bank card issuers

Total Managed Receivables and Accounts
35
20
17.2
30
30.1
15
12.9
25
11.4
20
Accounts in Millions
19.6
10
17.8
Managed Receivables in Billions
15
10
5
5
7 Providian Financial 17.80
0
0
Q2 2001
Q2 2002
Q2 2003
Managed Receivables
Number of Accounts
The Nilson Report, s in billions
6
Facility Workforce Reduction

• Commensurate with our size and increased
  operational efficiency, our facilities and
  workforce have been downsized

More than 50 reduction in total workforce
Four facilities closed in 2002
15,000
12,631

• New Hampshire
• Concord

8,393
10,000
Total employees
5,692
5,000

• Kentucky
• Louisville

• California
• San Francisco
• Oakland
• Pleasanton
• Sacramento
• Fairfield

5,000

• Utah
• Salt Lake City

• Texas
• Arlington
• San Antonio
• Austin
• El Paso

• Nevada
• Henderson

0
Q2 2001
Q2 2002
Q2 2003
Forecast Q4 2003
7
Equity Market Reaction

• Providians stock has tracked our restructuring
  progress
• 2003 year-to-date stock has appreciated by over
  80

SP 500 Index Annual Price Returns
Providian Financial 82.82
-93.83 Providian Financial
Based on PVN stock price of 12.00 on
September 18, 2003 Based on PVN stock prices
Dec. 31, 2000 - 57.50, Dec. 31, 2001- 3.55
Dec. 31, 2002 - 6.49
8
Restructuring Remains on Track

• Providian is a stronger entity and remains
  solidly on track with its restructuring
• Finance Strengthened capital, funding and
  liquidity positions
• Marketing Executing new middle market
  strategy developing new distribution
  channels
• Credit Reduced net credit losses and improving
  delinquency rates
• Operations Retooled for greater operational and
  cost efficiency

9
Finance

• We continue to maintain a solid financial
  foundation
• Liquidity 6.6 billion
• Capital 2.3 billion
• Reserves 702 million
• Providian National Banks total risk-based
  capital ratios remain in excess of 10
  well-capitalalized levels
• Call Report Basis 15.08
• Subprime Guidance Basis (1) 13.76
• Primary funding sources remain deposits,
  securitization and unsecured debt

Combined represent 47 of on-balance sheet loans
(1) Subprime guidance basis excluding the effect
of adopting the regulatory guidance on the
accrued interest receivable asset.
10
Funding Sources
Capital
9
Institutional Other
7
FDIC-Insured
Deposits
Securitization
48
36
Total Funding of 25.1 Billion as of June 30, 2003

11
Convertible Note Issuance in May

• Providian Financial Corp. completed a 287
  million, 5-year convertible senior note issue on
  May 27, 2003
• Summary of key terms
• Oversubscribed, upsized from 150 million
• Coupon 4 fixed rate
• Conversion premium 60
• Conversion price approximately 13.01 per share
  
• Proceeds to be used for general corporate
  purposes, repurchase of outstanding debt or other
  purposes consistent with our banking
  subsidiaries Capital Plans

12
Marketing Priorities

• Pro-actively manage our existing portfolio to
  optimize performance
• Maintain yields and reduce interest rate risk
  while improving credit quality of the portfolio
• Pursue a new account acquisition strategy to
  recruit high quality, profitable prospects
• Migrate acquisitions emphasis to Middle Market to
  capture greater profit potential and market
  opportunity
• Develop new programs and channels to generate
  profitable growth consistent with our Middle
  America emphasis
• Reposition the company by providing compelling
  new value propositions and customer experience
• Leverage partner relationships

13
Portfolio Management

• Portfolio management has included account
  repricings, credit line reductions and conversion
  from fixed to variable rates

of Fixed and Variable Rate Balances
Purchase APRs - Open Accounts
(Managed Basis)
(Managed Basis)
100
92.5
90
80
30
70
25.9
56.3
23.2
22.2
22.1
60
43.7
18.8
20
50
15.5
40
30
10
20
7.5
10
0
0
Dec-01
Dec-02
Dec-01
Dec-02
lt 600
600-669
670
Fixed
Variable
14
New Account Balance Growth

• New account and balance growth is achieving
  planned results and reflects our increased
  emphasis on the Middle Market

New Accounts Booked
New Account Balances
800
2,500,000
710
700
700
2,000,000
690
600
680
500
1,500,000
Balances ( Million)
Accounts (000s)
670
400
FICO Score
660
1,000,000
300
650
200
640
500,000
100
630
0
0
620
Q2
Q3
Q4
Q1
Q2
Q1
Q2
Q3
Q4
Q1
Q2
2002
2002
2002
2003
2003
2002
2002
2002
2002
2003
2003
15
The New Providian

• We have an opportunity to excel by focusing our
  company on serving Middle Americans
• The Middle America market is attractive
• Its large and targetable
• Its profitable
• Its receptive, less competitive and largely
  underserved
• We have distinctive competencies and
  differentiated products and services which can be
  honed to enhance our competitive advantage
• These competencies can be leveraged to
  differentiate Providian products and services,
  both under our own brand, and through relevant
  partner relationships

16
The New Providian

• Within the total universe of individuals with
  credit bureaus, a target subset creates our ideal
  target market
• Pass underwriting criteria and meet proprietary
  targeting profile
• Predominantly found in the FICO 600 to 739 bands

25
20
Credit Eligible (130MM)
15
Individuals (MM)
Credit Promotable (80MM)
10
Providian Target (30MM 40MM)
5
0
gt 800
600 to 619
620 to 639
640 to 659
660 to 679
680 to 699
700 to 719
720 to 739
740 to 759
760 to 779
780 to 799
Source Credit Bureau Data
17
The New Providian

• Consumers that fall into this sweet spot
  control almost 200 billion in unsecured credit

Unsecured Credit Held by Providians Target
Customers
50
45
40
35
32
30
Balances (Bn)
24
21
19
20
14
10
0
600-619
620-639
640-659
660-679
680-699
700-719
720-739
Source Credit Bureau Data
18
The New Providian

• Importantly for growth, their wallets are less
  crowded, and they are more receptive to new card
  offers

Credit Card Accounts (Owned,
Used, Opened and Activated)
7
100
Average Number of Credit Cards
Owned Average Number of Credit Cards Used
6
80
5
60
4
of Cards Used / Owned
of Consumers Opening / Active
3
40
2
20
1
0
0
760
600-619
620-639
640-669
670-699
700-729
730-759
FICO Bands
Source National Credit Bureau
19
The New Providian

• Based on the findings of our strategic planning
  efforts, we saw an opportunity to create a better
  kind of company focused on serving Middle
  American consumers

FAIR CREDIT
CLEAR COMMUNICATION
ATTENTIVE CUSTOMER CARE
NEW POSITIONING
REAL REWARDS
REAL INFORMATION
REAL VALUES
20
Strategic Marketing Partnerships

• Strategic marketing partnerships are expected to
  be a core component of our future marketing
  efforts
• We are in latter stages of discussions with
  several entities on co-branded relationships
• Consistent with strategy
• Expected to begin producing accounts before
  year-end
• PayPal co-branded program is producing solid
  results
• Working with partner to expand distribution

21
Credit Collections

• Credit performance continues to show improvement
• Managed net credit loss dollars continue to
  decline
• Managed 30 day delinquency rate in single digits
• Managed net credit losses first half 2003 1.59
  B
• Managed net credit loss guidance
• Full-year 2003 net credit losses 2.85 B
• Third quarter 2003 650 MM

22
Credit Performance
Credit performance continues to show improvement
Managed Portfolio
20
17.61
17.53
17.34
16.84
16.71
12
15.05
15
11.23
11.11
10.31
10.16
10.22
9.72
8
Managed Net Credit Loss Rate
10
Managed 30 Day Delinquency Rate
4
5
0
0
Q1 2002
Q2 2002
Q3 2002
Q4 2002
Q1 2003
Q2 2003
23
Impact of Credit Initiatives
1998 - 2001 vintages
Early- 2002 vintages
Mid-2002 to early 2003 vintages
24
Operations Enterprise Technology

• Focus on quality performance and creating
  customer centric culture and processes
• Develop flexible, robust platforms to support new
  opportunities
• Conversion to TS2 completed in August
• Build a culture of continual improvement and cost
  reduction
• Eliminate redundancies and outsource non-core
  activities to realize savings
• Outsourced development activities to Accenture in
  August

25
Summary

• Providian is a stronger entity and remains
  solidly on track with its restructuring
• Finance Strengthened capital, funding and
  liquidity positions
• Marketing Executing new middle market
  strategy developing new distribution
  channels
• Credit Reduced net credit losses and improving
  delinquency rates
• Operations Retooled for greater operational and
  cost efficiency

26
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27
Financial Addendum
28
Organizational Structure
Ratings as of September 2003 as provided by
Standard and Poors, Moodys and FitchRatings,
respectively
29
Borrowings

• Outstanding Maturity
• Providian Financial Corporation
• 3.25 convertible senior notes 343.3 MM
  August 15, 2005
• 4.00 convertible senior notes 287.5 MM May
  15, 2008
• Zero coupon convertible senior notes(1) 433.6 MM
  February 15, 2021
• 9.525 coupon capital securities 104.3 MM
  February 1, 2027
• Providian National Bank
• 6.65 senior bank notes 108.8 MM February
  1, 2004

(1) Amount includes accreted portion of a yield
to maturity of 4.00 per year. Holders are due
full principal amount of 884.0 million at
maturity.
30
Non-GAAP Managed Financial Information

• Loans that have been securitized and sold to
  third party investors are not considered to be
  our assets under GAAP and therefore are not shown
  on our balance sheet. However, the interests we
  retain in the securitized loan pools create
  financial exposure to the current and expected
  cash flows of the securitized loans. Although
  the loans sold are not on our balance sheet,
  their performance can affect some or all of our
  retained interests as well as our results of
  operations and our financial position. In
  addition, we continue to service these loans.
• Because of this continued exposure and
  involvement, we use managed financial information
  to evaluate our historical performance, assess
  our current condition, and plan our future
  operations. We believe that managed financial
  information supplements our GAAP information and
  is helpful to the readers understanding of our
  consolidated financial condition and results of
  operations. Reported financial information
  refers to GAAP financial information. Managed
  financial information is derived by adjusting the
  reported financial information to add back
  securitized loan balances and the related finance
  charge and fee income, credit losses, and net
  interest costs.
• The Company discloses certain projected financial
  measures relating to expected performance on a
  managed basis, such as net credit losses, net
  interest income margin and non-interest income
  margin. The Company develops such projections on
  a managed basis using managed financial
  information and does not in the normal course
  derive comparable GAAP projections. Developing
  such comparable GAAP projections would be
  unreasonably burdensome and in the opinion of
  management such comparable GAAP projections would
  not provide to the users of the financial
  information a significant benefit in
  understanding the Companys expected future
  performance.

31
Reconciliation of Reported and Managed Financial
Measures
Reported
Securitization
Managed
Reported
Securitization
Managed
Reported
Securitization
Managed
2003
2003
2003
2003
2002
2002
(in millions)
QTR 02
Adjustment
QTR 02
QTR 01
Adjustment
QTR 01
QTR 04
Adjustment
QTR 04
Earnings
Interest Income Loans
247.7


581.9


829.6


310.3


586.0


896.3


323.5


613.2


936.6


Interest Income Investments
(1)
43.9


(14.7)


29.2


41.9


(13.0)


28.9


42.6


(8.6)


34.1


Interest Expense
163.8


45.5


209.3


171.8


47.9


219.7


179.9


56.2


236.1


Net Interest Income
127.8


521.7


649.5


180.4


525.1


705.5


186.2


548.4


734.6


Non-Interest Income
(1)
393.3


1.0


394.3


417.5


13.4


430.9


293.1


(9.3)


283.8


Total Net Revenue
521.1


522.7


1,043.8


597.9


538.5


1,136.4


479.3


539.1


1,018.4


Financial Data
Quarter
Net Credit Losses
(2)
237


523


760


296


539


835


299


539


838


-


-


Quarter End
Total Loans
(3)
6,417


11,381


17,798


7,147


11,323


18,470


6,908


12,720


19,628


Total Assets
16,206


8,925


25,131


16,607


8,925


25,532


16,710


9,833


26,543


Quarter Average
Total Loans
6,684


11,361


18,045


7,500


11,452


18,952


8,046


11,294


19,344


Earning Assets
14,048


11,361


25,409


13,604


11,452


25,056


14,236


11,298


25,534


Total Assets
16,460


8,925


25,385


16,518


8,976


25,494


16,757


9,465


26,222


32
Reconciliation of Reported and Managed Financial
Measures
Reported
Securitization
Managed
Reported
Securitization
Managed
2002
2002
2002
2002
QTR 03
Adjustment
QTR 03
QTR 02
Adjustment
QTR 02
(in millions)
Earnings
328.2


656.2


984.4


350.5


654.5


1,005.0


Interest Income Loans
60.3


(13.2)


47.1


53.9


(14.7)


39.2


Interest Income Investments
(1)
189.0


62.7


251.7


196.0


65.0


261.0


Interest Expense
199.5


580.3


779.8


208.4


574.8


783.2


Net Interest Income
465.1


(21.0)


444.1


509.9


22.7


532.6


Non-Interest Income
(1)
664.6


559.3


1,223.9


718.3


597.5


1,315.8


Total Net Revenue
Financial Data
Quarter
244


559


804


269


598


867


Net Credit Losses
(2)
Quarter End
8,198


11,255


19,453


7,513


12,126


19,639


Total Loans
(3)
17,218


9,675


26,893


17,799


10,215


28,014


Total Assets
Quarter Average
7,305


11,932


19,237


7,578


12,195


19,773


Total Loans
15,011


11,932


26,942


14,243


12,195


26,438


Earning Assets
17,384


10,127


27,511


18,319


10,257


28,576


Total Assets
33
Reconciliation of Reported and Managed Financial
Measures
Excluding Discontinued Operations
Reported
Securitization
Managed
Reported
Securitization
Managed
2002
2002
2001
2001
Q1
Adjustment
Q1
Q2
Adjustment
Q2
(in millions)
Earnings
647.2


677.2


1,324.4


488.1


738.9


1,227.0


Interest Income Loans
44.0


-


44.0


Interest Income Investments
44.2


(13.5)


30.7


(233.4)


(185.9)


(419.3)


207.0


88.3


295.3


Interest Expense
325.3


637.1


962.4


457.8


491.3


949.1


Net Interest Income
894.6


(111.2)


783.4


1,113.2


(34.1)


1,079.1


Non-Interest Income
1,438.5


603.0


2,041.5


1,352.4


380.1


1,732.5


Total Net Revenue
Financial Data
Quarter
371


380


751


413


603


1,016


Net Credit Losses
Quarter End
14,060


15,992


30,052


Total Loans
9,913


12,231


22,144


20,917


15,144


36,061


Total Assets
18,729


10,265


28,994


Quarter Average
14,266


14,649


28,915


11,758


15,246


27,003


Total Loans
17,690


14,649


32,339


Earning Assets
16,427


15,246


31,673


20,237


14,008


34,245


Total Assets
19,275


13,392


32,667


34
Reported Credit Performance
Credit performance continues to show improvement
Reported Portfolio
20
12
15.79
14.88
14.21
15
14.19
14.04
13.38
8
Reported Net Credit Loss Rate
10
Reported 30 Day Delinquency Rate
4
5
0
0
Q1 2002
Q2 2002
Q3 2002
Q4 2002
Q1 2003
Q2 2003
35
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