Capital One

(COF) - Get Report

plunged to a new 52-week-low on Friday as the deteriorating economy crippled the consumer lender in the final three months of the year.

Late Thursday, McLean, Va.-based

Capital One

reported a whopping fourth-quarter loss of $1.4 billion, or $3.74 a share, compared to profit of $226 million, or 60 cents a share in the year-earlier period. Capital One also posted a full-year loss of $46 million, or 21 cents a share, it said.

Shares fell as much as 23% to a 52-week low $16.91 on Friday. The stock has rebounded more recently, but is still down 11.3% to $19.47.

The consumer finance company's miserable earnings stemmed from a $1 billion provision charge to prepare for massive losses in its credit card arm. Capital One also took an impairment charge of $811 million related to goodwill on its auto finance business.

Following Capital One's loss several analysts turned increasingly pessimistic.

John Stilmar, an analyst at SunTrust Robinson Humphrey, downgraded Capital One to the equivalent of a sell rating on concerns that the firm's main line of business -- its credit card arm -- will have less revenue opportunity given the dour environment.

"The resiliency of card revenue we believe is impaired given the depth of the economic pressures facing troubled borrowers," he writes in a note Friday.

Stilmar is additionally concerned about the company's capital levels as the "weakness in lending economics is more pronounced." He suggests that Capital One could cut its dividend to increase capital levels.

Capital One has been working to expand beyond its traditional model of a credit card company and increase its funding from deposits, through the acquisition of



North Fork

banks. The company announced its third banking deal in December, acquiring

Chevy Chase

bank. But its large consumer finance business is troublesome in the recessionary environment and will further impact its business, it warned Thursday.

The company's total allowance for loan losses is now $4.5 billion, "which is consistent with an outlook for $8.6 billion in managed net charge-offs" through then of 2009, it said. Capital One's total coverage for loan losses is now 4.5% of the portfolio.

Capital One expects large loan losses due to an unemployment rate that could reach as high as 8.7% in 2009 and housing prices that drop an additional 10% by the end of the year.

Capital One's worrisome outlook aligns with other banks with large consumer lending businesses, such as



Fifth Third Bancorp

(FITB) - Get Report

, both of which were hobbled in the quarter from the large addition to loan loss reserves.

Other credit card firms, including

American Express

(AXP) - Get Report


Discover Financial

(DFS) - Get Report

, have also felt pain from the souring credit environment. AmEx reports earnings on Monday.

Late Thursday, Standard & Poor's Ratings Services lowered its outlook on Capital One and its subsidiaries to negative from stable. The rating agency cited the firm's "lower profitability as the weak phase of the consumer credit cycle elevated credit losses on loans, and on its substantial noncash goodwill adjustment," S&P credit analyst Victoria Wagner said in a statement.

S&P acknowledged Capital One's bank franchise, which provides a core deposit base, historically strong capital and liquidity, and a less risky long-term strategy, it said.

The firm affirmed its credit ratings on Capital One at triple-B plus for the holding company and single A minus on the subsidiaries.