What happened

As a whole, the stock market is having a pretty calm day on Thursday. As of noon EDT, the Dow Jones Industrial Average was down by less than 0.3% and the S&P 500 benchmark index was higher by about 0.5%.

However, with most big bank stocks reporting earnings throughout the week, the financial sector remained under pressure. The Financial Select Sector ETF (NYSEMKT:XLF) was lower by 1.4% and is down by nearly 9% for the week.

One particularly noteworthy underperformer is Wells Fargo (NYSE:WFC). The massive consumer bank is down nearly 6% today and has lost nearly 19% this week alone.

Exterior of a Wells Fargo branch.

Image source: Getty Images.

So what

Wells Fargo reported its first-quarter earnings on Tuesday, and to put it mildly, investors weren't impressed.

It's not necessarily anything the bank is doing wrong, or even that the business itself is performing poorly, but rather what the bank sees ahead. Wells Fargo set aside $4 billion to cover loan losses in the first quarter -- a $3.1 billion increase from the first quarter of 2019. In short, Wells Fargo is expecting defaults to soar as consumers become unable to pay their bills in the recession.

Now what

A big question is why Wells Fargo has performed so much worse than the other big banks this week, and the answer is its business structure. Specifically, other big banks like JPMorgan Chase (NYSE:JPM) have large investment banking operations which benefit from volatility. In fact, JPMorgan Chase generated more equity and fixed-income trading revenue than in any other quarter in the bank's history. For other banks, this has helped offset the downtrends in the consumer banking business.

With almost all of its operations in consumer banking, not investment banking, Wells Fargo doesn't have this silver lining.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.