Saturday, November 27, 2004

Providian is Shark Bait

We all love banks and financial service groups because they're always being bought out.

Tom Brown--of Providian is the next one to go. Providian (PVN: NYSE), a subprime credit card lender has spent much of the past year recovering from credit quality problems. But then again, Providian Financial has always been known as the lender to the unlucky as one critic said -- pushing credit cards to consumers with poor credit histories. Class action lawsuits nearly toppled the company in the 90s. Mired in a bloodbath, the company pretty much abandoned the subprime business and started serenading a less risky customer base, forming partnerships with more upscale institutions like Am Exp. and Citi.

Nowadays, Providian finds itself in a better position, having fixed its credit problems. Tom Brown, probably one of the most recognized names on the Street, opines that once PVN realizes it is better off as unit of a large, diversified institution, a sale will be made. The recovery is there and the time is ripe for growth. Providian recently reported good numbers: 34 cents vs. 28 cents a year ago and raised guidance for 2004 to $1.15. Good news abounds: Management is on their toes, gross margins are up, and marketing costs are on a mean diet.

A good turnaround story in the bank & financial services sector is always fodder for the buyout speculators, this author being one of them.

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