UBS Warburg downgraded Capital One Financial (COF

) to neutral from buy.

Analyst Eric Wasserstrom says despite strong earnings per share, he downgraded based on valuation and fundamental factors. The company's credit losses are less than expected, and management sees continued credit improvement, but Wasserstrom is concerned about margin and balance sheet growth trends over the next several quarters.

He thinks Capital One's margin and receivable growth will converge on industry levels, suggesting that his thesis about relatively better performance has essentially played out. He cut the 2003 earnings per share estimate to $4.50, and cut the 2004 guidance to $5.10. He has a $36 target.