Sovereign Bancorp ( SOV) slipped 3% after an analyst downgraded the bank following its warning of a third-quarter profit hit from the tough credit environment. Friedman Billings Ramsey analyst James Abbott cut his rating on Sovereign to underperform from outperform -- which was the equivalent of a buy rating -- because of concerns about its consumer loan exposure and capital levels. Sovereign's "thin capital levels worry us considerably more than other lenders do with consumer exposure," Abbott wrote in a note on Monday. "Sovereign is very thinly capitalized ... leaving very little room for error. We believe the current economic environment suggests that 'error' is more likely than not, and Sovereign and others are likely to experience prolonged charge-offs." On Friday afternoon, Philadelphia-based Sovereign joined the throng of banks warning that volatility in the mortgage and credit markets this summer, as well as deterioration in the consumer credit environment, would cut third-quarter profits. The bank said its third-quarter provision for credit losses will more than triple to $155 million to $165 million from $51 million in the second quarter. Approximately $50 million of the provision increase is related to losses in its correspondent home-equity loan portfolio. Sovereign began exiting the correspondent home equity business last year. While it has sold a majority of the loans in the portfolio, it still had approximately $491 million worth of loans, most of which were to nonprime borrowers, as of June 30.