Fitch Ratings Affirms Providian Financial Corp.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 9, 2002

Fitch Ratings has affirmed the 'B' senior debt rating of Providian Financial Corp. (Providian) and related ratings for the company and its wholly-owned subsidiary, Providian National Bank (PNB) and removed them from Rating Watch Negative, where they were placed on Dec. 20, 2001.

Concurrent with this action, Fitch has raised the individual rating for Providian and PNB to 'D' from 'D/E'. The Rating Outlook is Stable. A complete list of affected ratings is detailed at the end of this release. Approximately $1 billion of senior debt and $13.9 billion of deposits are affected by this action.

Fitch's rating affirmation reflects the progress management has made in its restructuring of the company, particularly with the completion of the sale of non-core assets, which should allow management to focus on rebuilding its credit card franchise. Along with asset sales, there has been a virtually complete transformation of the senior management ranks, with seasoned industry executives assuming key responsibilities at the company. Notwithstanding these developments, Fitch believes that meaningful execution risk remains in repositioning the company, particularly under more difficult economic and industry conditions.

Fitch's current ratings and Stable Outlook for Providian reflect the significant changes that have occurred since the company first began its restructuring. Positively, Fitch recognizes the strong liquidity position of the regulated banks and the changeover in senior management to lead the company going forward. Moreover, Providian's strategy to move away from the deep subprime market, if successful, should ultimately lead to more stable earnings and asset quality measures over time.

Fitch's rating concerns center on the company's ability to regain access to the securitization markets and the company's ability to be competitive in the credit card segment, especially in the prime segment. Although Fitch recognizes the strong liquidity position of the banks in absolute terms, with over $7.9 billion of cash and marketable securities at June 30, 2002, Fitch believes that liquidity could ultimately be strained if the company is unable to restore access to the securitization markets in order to fund future receivable growth and refinance maturing asset-backed transactions. Moreover, excess spread levels in the Providian Gateway Master Trust (PGMT) will remain pressured over the near term, which could ultimately lead to early amortization, if excess spread levels deteriorate further. Fitch notes that although management has laid out a credible strategy, meaningful execution risk remains, particularly given the more competitive industry conditions in the prime credit card segment and regulatory scrutiny in the subprime card segment. Lastly, Fitch believes Providian will need to 'right size' its operating infrastructure in order to reduce costs and create operating efficiencies. To this end, the company has already announced the closure of certain servicing centers and other cost saving initiatives.

Providian's regulated banks, PNB and Providian Bank (PB) remain subject to a written agreement with the Office of the Comptroller of the Currency, Utah Department of Financial Institutions, and Federal Deposit Insurance Corp. Aside from achieving a 10% risk-based capital ratio at the regulated banks, Providian's business practices conform to current regulatory guidance on credit card lending. As part of the agreement, the company's regulated banks must achieve a 10% risk-based capital ratio, after applying higher risk-weights for subprime loans, by June 30, 2003. On a combined basis, the banks' risk-based capital ratio, after applying subprime guidance, was 11.88%, at June 30, 2002, which is above the 10% threshold. However, this ratio will fluctuate between now and June 30, 2003 based on Providian's receivable growth and securitization activity. It should be noted that Providian has applied to merge the charters of PNB and PB, with PNB the surviving legal entity.

Ratings affirmed with Stable Outlook:

Providian Financial Corp.;
--Senior debt 'B'.

Providian National Bank
--Long-term deposits 'BB-';
--Short-term deposits 'B';
--Senior debt 'B+';
--Subordinated debt 'B-'.

Providian Capital I
--Trust preferred 'CCC'.

Ratings upgraded with Stable Outlook:

Providian Financial Corp.
--Individual to 'D' from 'D/E'.

Providian National Bank
--Individual to 'D' from 'D/E'.