Wells Fargo & Co. yesterday reported a fourth-quarter profit of nearly $3 billion, but said chargeoffs also crept higher during the period. Chargeoffs totaled $5.4 billion, or 2.71% of average loans, up from $5.1 billion, or 2.5% of average loans, in the third quarter.

Scott Siefers, a managing director at Sandler O'Neill, wrote to investors after the results: “Wells Fargo again posted very strong revenue trends, though credit and operating costs were both a bit higher than we had anticipated.”

Wells Fargo’s net income for the fourth quarter ended Dec. 31 totaled $2.82 billion, compared with a loss of $2.73 billion in the same period a year earlier. The total included a $500 million credit-reserve build as the company sets aside more money to cover souring loans. The results also included $450 million in merger costs and several other one-time items.

The results ended a year in which Wells Fargo generated record net income of $12.3 billion on record revenue of $88.7 billion. "Wells Fargo has done a remarkable job of plowing through the challenging credit cycle," added Siefers. However, he noted that excluding several one-time items, fourth-quarter earnings came in slightly below his expectations.

The bank raised more than $12 billion selling new shares in December to help repay $25 billion it received from the government's Troubled Asset Relief Program. 

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