per-share earnings Thursday, but investors turned thumbs down.

No wonder. Along with the spurt in profits, the company reported a rise in accounts that were delinquent 30 days or more, to 5.2% of managed loans, from 4.7% at the end of the second quarter.

The stock closed down 1.1%, or $1, to $88.625 on Thursday, a day when bank indexes showed little change. The American Banker index of the 50 largest U.S. banks rose 0.02%, and the American Banker 225 slipped 0.3%.

An investor who has shorted Providian stock said the reported earnings "were not a clean number as far as I'm concerned." He said he was concerned about the $191 million increase in nonperforming loans, to $954 million.

And investors remain worried about lawsuits and an investigation by San Francisco's district attorney over Providian's handling of customers. Providian is facing lawsuits from plaintiffs' attorneys seeking class-action status. The company is accused of imposing late fees unfairly by failing to record payments when they were received and charging consumers penalties for being late. It also has been accused of charging customers $7.95 a month for credit protection insurance they did not request.

Providian's stock has been bouncing wildly, as investors' perceptions change about whether Providian is succeeding in putting its legal problems behind it. The investor who is shorting Providian stock said "they can't cut a deal with the D.A. with the methodology they're employing. They had to start jamming these people, otherwise they wouldn't make money."

Providian's stock has been taking a beating since April, when it hit its 1999 high of $131.625. Thursday's closing price was 33% lower. Its woes have led investors to sell off other credit card stocks as well, such as Capital One Financial Corp. of Falls Church, Va., and to a lesser extent, MBNA Corp. of Wilmington, Del.

To help reverse the course of its stock, Providian has launched an all-out campaign to convince the markets that its problems are under control. In May it set up a toll-free telephone number to deal with complaints. The company also hired independent mystery shopper firms to review its customer service. It also trained 4,300 of its customer service representatives to handle customer queries in one phone call. Employees now "close every call asking the customer if they are satisfied," David J. Petrini, Providian's chief financial officer, said Thursday.

The campaign seems to have had some success, at least among consumers. Complaints to the Office of the Comptroller of the Currency fell to 100 in September, from 231 in June, according to Providian. Similarly, complaints regarding Providian at the Better Business Bureau in Oakland decreased to 38 in September, down from 119 in June.

"Customer complaints have fallen dramatically as their efforts to improve customer satisfaction" have taken hold, said David Hochstim, an analyst at Bear, Stearns & Co. in New York. "It is hard to make a compelling argument that at this company customers are unhappy."

Despite Thursday's decline in the stock price, some analysts found sunshine in the earnings report. Aside from the earnings growth, the San Francisco-based credit card bank reported that it opened a million new accounts in the quarter, bringing its total customer base to 11 million. Its managed loans rose 56%, to $18.4 billion.

"I don't have any company that is beating the earnings estimates by so much and have so much potential left," said Mark C. Alpert, an analyst with Deutsche Banc Alex. Brown in New York. He said Thursday that late fees and penalties have declined over the last year from a third of fee income to 20%.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.