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Tickers in this Article: COF, WFC, USB, KEY
S&P cut the credit ratings on a swath of banks today - including Capital One Financial (NYSE:COF), Wells Fargo & Co (NYSE:WFC), KeyCorp (NYSE:KEY), U.S. Bancorp (NYSE:USB) and several other banks.

IN PICTURES: Top 7 Bank Failures in U.S. History

S&P stated, "Operating conditions for the industry will become less favorable than they were in the past, characterized by greater volatility in financial markets during credit cycles and tighter regulatory supervision."

Capital One
For Capital One, the rating downgrade shouldn't have been too surprising, as continued credit deterioration and rising unemployment have been putting continued pressure on its balance sheet.

At the end of May 2009, Capital One reported annualized net charge-off rate on U.S. credit cards of 9.41% - a number widely reported in the media. However, if you look at the footnote it describes that a recent change to how they process delinquent accounts led to a 50 basis point improvement in the metric. So in reality, their net charge-offs were closer to 10%.

Capital One has risen more than most, closing at 23.15 on June 16, up nearly 200% from its March lows of 7.80. For comparison to its current situation - in March 2009, Capital One's net charge-offs on U.S card holders was 9.33% and unemployment was 8.5% and they had a better credit rating. Does deterioration in net charge-offs and a rising unemployment justify a 200% increase during that time? (Learn about credit ratings in our article, What Is A Corporate Credit Rating?)

The Bottom Line
On the eve of financial regulatory reforms and further economic uncertainty, this would be a good time to take some profits off the table if you haven't already. (Read Buy When There's Blood In The Streets, to learn how contrarian investors find value in the worst market conditions.)

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