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Providian to Lay Off 800 More Workers

Financial services: Credit card issuer has cut payroll by 11% as a result of many customers failing to pay their bills.

January 04, 2002|From Bloomberg News

Providian Financial Corp. will fire another 800 employees to cut costs as more of its credit card customers are unable to pay their bills. The reductions will trim first-quarter earnings, the company said.

With the new cuts, the sixth-biggest Visa and MasterCard issuer will have reduced its payroll of 12,500 by about 11% since last fall. The firings--to be completed by mid-month--will lower first-quarter profit by as much as $15 million, and more reductions are likely, Providian said.

The San Francisco-based company replaced its chief executive in November and wants to sell more than $3 billion in loans to stem rising credit card losses. Third-quarter earnings fell 71% as more customers with poor credit histories were unable to pay debts in the slowing economy. Shares tumbled 94% last year.

"It all contributes to where the company wants to go," said Frank Barkocy, a senior bank analyst at Keefe Managers Inc., which manages about $200 million and bought several hundred thousand Providian shares when it dropped below $3. "There are still a number of head winds in front of them."

Shares of Providian fell 11 cents to $3.44 in New York Stock Exchange trading.

The company is eliminating telemarketers and other staff who develop and sell products Providian no longer offers, spokesman Alan Elias said.

As losses rose, federal regulators prohibited Providian from issuing new cards to high-risk customers, and the company said it would retreat from much of its marketing to the most credit-worthy people to focus on middle-income households.

Providian in November said it would fire 700 employees and close a Henderson, Nev., phone center, reducing fourth-quarter profit by $12 million. About 150 workers have since been hired in Texas, Elias said. CEO Joseph Saunders, who ran FleetBoston Financial Corp.'s credit card business until November, told employees of the reductions Thursday. The two rounds of cuts will save about $60 million a year, the company said. In 2000, expenses were $2.47 billion, before taxes.

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