9-707-446
REV: JANUARY 28, 2008

JOHN R. WELLS

Providian Financial Corporation
Introduction
On October 3, 2005, Washington Mutual acquired Providian Financial Corporation, the ninthlargest credit card issuer in the U.S., for $6.5 billion. At the time, Providian had approximately 10 million customer relationships and a balance of $18.6 billion. For some observers, the transaction was merely the end of another chapter in the history of the fast consolidating credit card market.1 For Providian CEO Joseph Saunders it was vindication of four years’ hard work in turning around a company that many thought was close to bankruptcy. Saunders reflected, “I actually think that we took over a company that many people—maybe even most people—thought was going to fail”; he added, “Providian is no longer just a turnaround story, we are a success story.”2

Company History
Providian began as Commonwealth Insurance, which was founded in 1904. The company survived the depression of the 1930s and, in the late 1960s, formed Capital Holdings to acquire other insurance enterprises and financial services companies. In the 1980s Capital Holdings started targeting low- and middle-income people when it established itself in Kroger grocery stores and in certain Bank of America branches. The 1984 acquisition of First Deposit Corporation from Parker Pen marked the beginning of the compnay’s focus on credit cards, which “later became [its] primary profit-making operation.”3 In the 1990s, Capital Holdings continued expanding through acquisitions despite significant problems in its portfolio; its insurance operations in particular were disappointing in the mid-1990s.4 The company changed its name to Providian Bancorp in 1994 and focused on financial services and targeted-insurance marketing. Providian Financial was spun off from Providian Corporation on June 10, 1997, to exploit the fast