Bloomberg News
SAN FRANCISCO - Shares of Providian Financial Corp., the biggest U.S. credit card lender to consumers with tarnished credit, rose as much as 9% after said it planned to buy back up to $500 million in common stock next year.
Providian shares rose $3.8125 on Thursday, to $85.50. Earlier they had reached $88.75.
The company, the eighth-biggest U.S. credit card lender, said after the close of trading Wednesday that its board authorized the share buyback for employee compensation, benefit plans, and other purposes.
At the current price, the stock repurchase would amount to about 4% of Providian's shares outstanding.
Before Thursday the company's shares were 41% off their high, set in April. The stock tumbled twice after prosecutors in San Francisco and Connecticut started investigations into the way Providian conducts its business.
A number of lawsuits that claimed the company improperly charged thousands of customers late fees and misled them into buying credit insurance were also filed.
Providian has 11 million customers and about $16 billion in credit card loans outstanding. Its profit has increased 76% to 102% in each of the last five quarters.
By targeting consumers who have difficulties getting credit from other banks, Providian is often able to charge interest rates in excess of 20% to 25%, as well as annual fees and other charges. The average interest rate on a U.S. credit card is about 16%.
