Legg Mason Cuts Providian Financial to 'Hold'

Analyst Chris Brendler says the company needs better-than-expected loan and earnings growth for the stock to have further upside

Legg Mason downgraded Providian Financial (PVN ) to hold from buy.

Analyst Chris Brendler says while he's increasingly convinced of a significant improvement in credit quality, he thinks Providian needs better-than-expected loan and EPS growth for the stock to have further upside. Despite his positive view of the shares over the last six months, he remains skeptical about growth prospects, particularly in the ultra-competitive prime market, where the company has a mediocre track record, a major competitive disadvantage, and a nascent strategy.

Brendler cut his EPS estimates from 75 cents to 34 cents for 2003, and from $1.10 to 97 cents for 2004, excluding reserve reduction. He believes his new estimates are more appropriate when considering valuation on price-earnings basis.

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