Updated with conference call details, analyst comment and latest share prices.

SAN FRANCISCO ( TheStreet) -- Wells Fargo ( WFC) once again proved itself a revenue-generating machine, reporting a profitable fourth quarter despite escalated credit costs and a charge for repaying bailout funds.

Wells earned $394 million in the last three months of 2009, or 8 cents per share, vs. a loss of $3 billion, or 80 cents per share in the same period a year earlier. Excluding a charge for TARP repayment and preferred dividends, Wells would have earned $2.8 billion in the December quarter.

Revenue more than doubled to $22.7 billion, reflecting growth across the Wells-Wachovia franchise in businesses as diverse as asset management, auto lending and mortgage banking. Pre-tax, pre-provision earnings, a metric commonly used to judge Wells' results, climbed to $9.9 billion in the latest quarter from $3.7 billion in the year-earlier period, but was down 8% from the third quarter.

Earnings and revenue topped the average analyst expectation of a 1-cent per share loss on $22 billion in revenue, according to Thomson Reuters.

"As this past year's financial performance has shown, the earnings capability of Wells Fargo's business model has significant power to generate capital internally," Chairman and CEO John Stumpf said in a statement. "Because of the value we created in 2009 for our customers and communities, we were able to achieve record revenue and earnings for the year."

As expected, credit costs continued to escalate at Wells Fargo, albeit at a more moderate pace.

Wells Fargo charged off $5.4 billion worth of bad loans, up $300 million from the previous quarter. The rise was less than half the $700 million acceleration during the third quarter. Nonperforming loans represented 3.12% of Wells' loan portfolio at year-end, up from 2.61% at Sept. 30. Again though, that climb was less significant than the third-quarter's 69 basis point rise.

Wells Fargo built reserves against losses on those souring loans to $25 billion overall. Reserves were up $500 million from the previous period, representing one-half of the third quarter's $1 billion build-up.

And despite the rise in problem loans and related costs, Wells Fargo's $12.25 billion stock offering helped to both repay TARP and boost capital levels. Its risk-weighted Tier 1 capital level now stands at 9.3%, far above the 5.2% three months earlier, and above the year-ago level of 7.8%.

Though not as high as some peers -- Bank of America's year-end Tier 1 capital ratio, for instance, stood at 10.4% -- the capital caution finally puts Wells in line with competitors and may have helped assuage a key investor concern.

In presentation slides and during a conference call, executives also highlighted positive results from the Wachovia acquisition, whose full integration is expected to take three years. Credit costs from Wachovia's big book of toxic loans are running in line with expectations, while expense savings tracked ahead of schedule and merger costs are now expected to come in below $5 billion, vs. an initial estimate of $7.9 billion. Wells also managed to retain more deposits and has seen better revenue synergies than initially expected.

"The merger with Wachovia is exceeding all of our expectations in terms of expense savings, successfully meeting integration milestones, the quality of our team members and customers and the opportunities we see together going forward," Stumpf said during Wells Fargo's first-ever earnings conference call.

Despite the positive results and optimistic signs for the future, Wells Fargo shares weren't reflecting the news. Investors have digested a slew of bank earnings reports over the past week, and may still be coming to conclusions about what they say about the economy, and how long it will take banks to return to "normalized" results.

"While Wells Fargo has done a remarkable job of plowing through the challenging credit cycle, we do not necessarily see anything in the quarter's results to move the stock materially one way or the other," Sandler O'Neill analyst R. Scott Siefers said in a report on Wednesday.

Wells Fargo was up in pre-market action, then reversed earlier gains, recently trading 0.9% lower at $28.04. It's been a fairly volatile session for the stock as it's ranged from a low of $27.70 to a high of $28.65. Volume stood at 62.2 million, well ahead of the issue's trailing three-month daily average of 48 million, with less than a half hour of trading left.

Trading in the banks was positive overall on Wednesday with the KBW Bank Sector index rising nearly 1.8%, led higher by rallies in a number of other prominent banks reporting before the open, including Bank of New York Mellon ( BK), Northern Trust ( NTRS), State Street Corp. ( STT), and U.S. Bancorp ( USB). State Street was the biggest gainer in the group, rising 8% in late trades.

For its part, Bank of America ( BAC) shares were edging higher in late trades after the company reported a $5.2 billion loss on Wednesday, weighed down by high credit costs and a hefty charge for repaying TARP in December. Morgan Stanley ( MS) also disclosed its numbers, saying it got back in the black in the December period, but its performance fell short of Wall Street's expectations due to a large drop in trading revenue.

Last Friday JPMorgan Chase ( JPM) kicked off the bank earnings season with a revenue disappointment as well, and evidence of a struggling consumer business, while Citigroup ( C) followed up on Tuesday with a $7.6 billion loss. Shares of those companies were up 0.5% and down 2% respectively.

-- Written by Lauren Tara LaCapra in New York.