updated 11/6/2007 6:17:52 PM ET 2007-11-06T23:17:52

Capital One Financial Corp. said Tuesday it could record several hundred million dollars more in charge-offs in 2008 than previously forecast, due to persistent loan delinquencies and the troubled housing market.

Shares of Capital One fell $1.06 to close at $59.47 on Tuesday after sinking to a new 52-week low of $58.05.

The McLean, Va.-based company, a credit card issuer that is expanding into retail banking, said last month it expected to see $1.2 billion in charge-offs in the fourth quarter and $4.9 billion in 2008, which includes $175 million in the first quarter of 2008. The losses were based on the delinquency trends in Capital One's loan portfolio.

In a filing Tuesday with the Securities and Exchange Commission, the company said it now expects the charge-off amount for 2008 to range from $4.9 billion to as much as the mid-$5 billions. It's forecast for the first quarter remains unchanged.

The updated forecast takes into consideration both the uncertainty associated with elevated delinquencies and the fact "we didn't quantify the potential if the housing market were to continue to degrade," the company said.

The company said its previous forecast for the fourth quarter is "still on-track."

Still, Capital One joins the ranks of leading financial institutions whose results are suffering due to the continued unrest in the nation's credit markets. Also Tuesday, Friedman Billings Ramsey analyst Gary B. Townsend predicted additional write-downs likely are forthcoming in the fourth quarter at Bank of America Corp. and Wachovia Corp., citing "continued capital markets weakness."

Bank of America and Wachovia declined to comment Tuesday on whether they face more earnings write-downs. The companies will file quarterly reports with the Securities and Exchange Commission within days that will disclose more details about their results.

Shares of Bank of America rose $1.11 to close at $45.56 on Tuesday, while Wachovia shares closed up $1.27 to $43.20.

The developments at Capital One and the Charlotte-based banks came a day after Citigroup Inc.'s Chairman and Chief Executive Charles Prince joined former Merrill Lynch & Co. CEO Stan O'Neal, who resigned from the investment bank last month, as the highest-profile casualties of a credit crisis driven by the nation's slumping housing market.

On Monday, Citigroup said it may write down $8 billion to $11 billion of its debt in the fourth quarter. That would come after the nation's biggest bank took a $6.5 billion hit in asset mark-downs and other credit-related losses in its third quarter. New York-based Citigroup also revised down its results for that quarter by $166 million, after correcting the value of the company's exposure to complex financial instruments called collateralized debt obligations.

CDOs are instruments that bundle different kinds of risk, and some include pieces of bonds backed by mortgages given to subprime borrowers. Both Bank of America and Wachovia are exposed to CDOs.

Wachovia was the third largest CDO manufacturer in 2006, with 52 transactions totaling $25.4 billion, Townsend said. By comparison, he said, Merrill Lynch and Citigroup ranked first and second with $49.1 billion and $33.5 billion in CDO deal value.

"While we consider Wachovia's valuation attractive, we believe that the company's mortgage operations will limit the shares' upside until real estate markets and nonperforming asset levels stabilize," Townsend wrote.

Last month, Bank of America reported $607 million in trading losses and recorded $247 million in loan markdowns, helping lower third-quarter profits by 32 percent to $3.7 billion. Wachovia took a $1.3 billion hit related to the global credit crunch, depressing earnings by 10 percent to $1.7 billion.

Neither Wachovia nor Bank of America offer subprime loans, or those made to borrowers with weak credit. Over this past year, mortgage lenders have found themselves battling a spike in mortgage defaults and foreclosures, especially in subprime loans.

Bank of America exited the subprime lending market in 2001 when Ken Lewis took over as chief executive, calling it a business that had "become unattractive from a risk-reward standpoint." And Wachovia has previously said that only about 0.5 percent of its existing mortgage portfolio is subprime.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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