The big banks will be challenged in the months ahead as the coronavirus pandemic persists, but perhaps none more than Wells Fargo (NYSE:WFC).

That's according to a recent research report from UBS analyst Saul Martinez, who lowered his rating on the company from neutral to sell, primarily because the bank is not earning enough to protect against future loan losses.

UBS reduced its forecasts for earnings at the bank in 2020 and 2021 by 47% and 24%, respectively. Overall, UBS trimmed forecasts at large and regional banks by 25% in 2020, on average, and 18% for 2021.

Wells Fargo

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"[A] low earnings base means incremental revenue and expense headwinds have a disproportionately large percentage point impact on earnings," Martinez said, according to Barron's.

Wells Fargo only reported $0.01 per share in its first-quarter earnings report, down from $1.20 per share in the prior-year period, posting the largest decline in profits of any of the larger banks. 

While most banks are expected to struggle this year due to a low-interest-rate environment and higher loan losses, Wells Fargo is dealing with an asset cap placed on the bank by the Federal Reserve two years ago for creating millions of phony bank accounts.

The Fed has allowed Wells Fargo to make emergency small-business loans in the Paycheck Protection Program, but the bank must forfeit all of the fees from the loans.

Martinez also said he is concerned that Wells Fargo is not setting aside enough cash to cover future loan losses, specifically in regards to commercial and industrial loans.

The bank only increased its credit provision by about $3.1 billion from the first quarter of 2019 , while other large banks such as JPMorgan Chase and Bank of America increased their provisions by roughly $6.9 billion and $3.8 billion, respectively.

Correction: The original version of this report misstated the amount by which Wells Fargo increased its credit provision in the first quarter.

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