On Thursday, the same day Providian Financial Corp. announced that it would cut another 800 jobs by the end of next week, the company confirmed that the president of its credit card business, David Alvarez, who had been a vice chairman of the company, had resigned in early December, for what the company said were personal reasons.
A former company insider said that Mr. Alvarez may have been asked to leave the company after its new chief executive officer, Joseph W. Saunders, took over in November.
Mr. Alvarez was among the high-ranking Providian executives who had sold millions of dollars of company stock in the middle of last year, shortly before Providian warned investors that it would not meet its third-quarter performance goals. Those stock sales are the focus of several shareholder lawsuits.
An analyst who follows Providian, David Hendler of CreditSights.com, wrote in a research note that no one has been named to replace Mr. Alvarez, and that his duties are being assumed by the units heads of marketing and credit.
With regard to Alvarez, we can only assume at this point, that the regulators put pressure on the company to make more managerial changes in addition to the departure of ex-CEO [Shailesh J.] Mehta, Mr. Hendler wrote. This is in light of Providians serious credit and liquidity difficulties.
The announced job cuts are expected to generate a first-quarter charge of $10 million to $15 million.
We need a leaner work force, Mr. Saunders said in a press statement. I very much hope that we can go through this process with as much fairness and grace as our circumstance permits.
In November the troubled San Francisco credit card lender eliminated 550 positions and closed its Henderson, Nev., facility.
The two cuts combined would amount to 11% of Providians 12,500-person work force. The company said that, even though the layoffs will be expensive in the near term, it expects to save $60 million this year as a result of the cuts.
Providians problems seemed to come on suddenly and to deepen quickly. In July it announced that its second-quarter net income had risen 24% from a year earlier, but in September it issued two warnings about its third-quarter earnings.
On Oct. 18 the company reported that its third-quarter net income had fallen 71%, and that Mr. Mehta would resign as its chairman, chief executive officer, and president.
By November federal bank regulators had put a tight grip on Providian by issuing lists of requirements for the company to meet right away, including one that is forcing it out of subprime lending, where it made its name.
Among the steps Providian has taken to appease regulators including the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., and the Utah Department of Financial Institutions was its hiring of Mr. Saunders from FleetBoston Financial Corp., where he had headed Fleet Credit Card Services.
Providian has also given the regulators the plan they requested for managing capital and growth for the next three years, and has agreed to stop subprime lending. And, in a move regulators did not request, the company said it was seeking to sell its card businesses in Argentina and the United Kingdom, which together make up $188 million of deposits and $585 million of receivables.
Pending the sale, it has agreed with the U.K. Financial Services Authority that its U.K. branch will not accept new deposit customers or solicit new loan applications.
Providians stock was the worst performer in the Standard & Poors 500 Index last year. If fell nearly 94%, to close at $3.55 a share on Dec. 31.
In trading Thursday its shares fell 2.82%, to $3.45.
The company has hired Salomon Smith Barney, a division of Citigroup Inc., and Goldman Sachs Group Inc. to review its strategy and help manage its balance sheet. said Alan Elias, a Providian spokesman, said it may sell $3 billion of subprime loans in the very near future, and asset sales could put more jobs on the line.
My crystal ball is a little hazy, but the potential exists that there could be additional cuts, Mr. Elias said. He denied, however, that Providians management is readying the company for a sale.
Providian, with $30 billion of credit card receivables, is focused on downsizing after several years of expansion.
It is a large and troubled company. Their size is working against them, said E. Reilly Tierney, an analyst with Fox-Pitt, Kelton Inc. We would not be surprised to see more surgical staff reductions as they continue to winnow their portfolio.
