As the economy prepares for a looming recession, many banks are bracing for heavy loan losses. Several of the largest banks in the world, such as JPMorgan Chase, Bank of America(BAC -0.53%) and Wells Fargo, have already reported huge profit declines in the first quarter of this year, ranging from 40% to 90%. That's primarily a result of having to set aside billions of dollars to cover loan losses.

Although an economic downturn will hit the banking sector particularly hard, there are some banks that may actually do well during an economic downturn, at least compared to their peers. These banks are less reliant on revenue from interest income from loans and more so on revenue from fees from investment management, investment servicing, and trading activity resulting from heightened volatility that creates more transactions. Here are four larger bank stocks that could outperform the banking sector during this upcoming stretch.

State Street building

Image source: Getty Images.

State Street

First-quarter profits at State Street (STT 2.72%) soared 25% on an annual basis, driven by a 6.2% increase in fee revenue. State Street is a custody bank, meaning it's mostly in the business of servicing or managing assets on behalf of mutual funds, retirement companies, and investment pools, among others. Therefore, it derives more of its income from fees than from interest on loans. Total fee revenue in the first quarter made up roughly 78% of total revenue. The stock has been on the rise for most of the last month.

Bank of New York Mellon

Part of Warren Buffett's portfolio, Bank of New York Mellon (BK 5.24%) turned in strong earnings results in the first quarter of 2020. The company increased its net income 11.7% from the first quarter of 2019 and delivered $1.05 in earnings per share (EPS), beating expectations. Like State Street, the company is not very dependent on interest income and gets most of its revenue from fees in its investment management and custodial services. Fee revenue made up more than 80% of total revenue in the first quarter. The bank's stock price has also steadily increased since mid-March.

Charles Schwab

Charles Schwab (SCHW -0.92%) didn't have quite the same success in the first quarter as Bank of New York Mellon or State Street, but it didn't slump as hard as some of the bigger banks, either. The company reported net income of $795 million, or $0.58 per diluted share, which is an 18% drop in profits from the first quarter of 2019. Schwab is a securities-broker dealer and investment management firm, and also has a principal banking division. Interestingly, trading revenue in the first quarter of 2020 is down 13% from the first quarter of 2019, but up 54% over the fourth quarter. Clients also opened a record new 609,000 brokerage accounts -- more than 280,000 in March alone. Additionally, the company recently announced the purchase of TD Ameritrade, a move the company says will add scale to improve the client experience, provide more resources for registered investment advisors, and continue to improve operating efficiency.

Northern Trust

Profits at Northern Trust (NTRS 2.79%) grew nearly 4% on an annualized basis in the first quarter of 2020, beating analysts' expectations. The solid quarter is not a huge surprise, considering the company operates heavily in the investment management and servicing space. Earnings were driven by an 8% year-over-year increase in revenue from the bank's "trust, investment and other service fees" category -- its largest revenue segment. The bank did take a much higher credit provision in the quarter, like most banks, to account for future potential loan losses, but trusts, investments, and other service fees make up nearly 63% of revenue.