But investors focused on a second consecutive quarterly decline in a figure analysts use to gauge future gains in the lucrative home-loan organization.
In addition, a surge of deposits and near record-low interest rates continued to squeeze profit margins at the fourth-largest U.S. bank by assets.
The drop in the San Francisco company's home loan pipeline is "likely to be a source of concern," said Citigroup C -1.14% analyst Keith Horowitz.
Overall, fourth-quarter net income was $5.09 billion, or 91 cents a share, compared with the year-ago $4.11 billion, or 73 cents a share. Revenue rose 6.3% from a year earlier to $21.95 billion. The figures beat Wall Street analysts' consensus estimates.
Shares of Wells Fargo, up 22% over the past year, dropped 30 cents, or 0.8%, to $35.10 amid a broad pullback in financial shares.
A $30 billion rise in deposits during the quarter, to $945.75 billion, underscores an industrywide struggle to make new loans; credit-worthy borrowers are scarce amid soft employment growth and stagnant incomes.
Chief Executive John Stumpf said on a call with analysts that the company feels "no urgency" to put the excess funds to work. "Virtually all these deposits are part of relationships," he said. "This is going to benefit this company for years and years and years to come."
Wells Fargo currently lends out about 80% of its deposits, while banks typically like their loan-to-deposit ratio to be near 100%. Chief Financial Officer Timothy J. Sloan acknowledged the slow pace of economic growth has affected the bank's ability to lend. "It's not where we'd like it to be," he said.
As a result of the deposit inflow, net interest margin?aan important gauge of lending profitability?awas 3.56%, down from 3.66% in the third quarter and illustrating the impact of low interest rates on profits. "I think you have to recognize that this interest-rate environment is very difficult," said Fred Cannon, an analyst with Keefe, Bruyette & Woods.
The results also point to early signs that an end may be coming for the U.S. home-refinancing boom, which has been spurred by low interest rates and has resulted in a lucrative stretch for large home loan banks including Wells Fargo and J.P. Morgan Chase JPM -0.02% & Co.
Mortgage-banking income for the fourth quarter totaled $3.07 billion, up 30% from a year earlier. But mortgage loan originations fell 10% from third-quarter levels to $125 billion, and the company's unclosed-mortgage pipeline dropped for the second quarter in a row, tumbling 16% to $81 billion at year-end from $97 billion at Sept. 30.
The drop in the mortgage loan pipeline is especially important to Wells Fargo, which has become the nation's biggest mortgage loan lender as rivals such as Bank of America Corp. BAC -1.27% have pulled back from the organization amid hefty losses. Early signs show that Wells's U.S. mortgage-market share slipped slightly, according to Mr. Sloan, but full numbers won't be known until other banks report earnings.
Mr. Cannon said it is unclear if the pipeline at Wells has slowed because the bank is tightening its standards or if its market share has slipped.
But Paul Miller, an analyst with FBR Capital Markets, cautioned against reading too much into the numbers.
The second and third quarters tend to be stronger ones for mortgage loan production.
"A lot of people are looking at the pipeline decline and saying it's the beginning of the end," he said. "I think it's more seasonality than anything else."
Mr. Sloan said he didn't know if the refinancing boom was coming to an end, but said "it's prudent to plan for an environment where volumes come down and margins come down."
Total loans at the bank rose 4% from a year earlier to $799.6 billion. Wells kept on its book some $10 billion of mortgages, forgoing fees that lenders can reap when selling loans to the government-backed mortgage loan investors Fannie Mae FNMA 0.00% and Freddie Mac FMCC -1.69% but adding to the company's income stream.
Wells recorded a $644 million fourth-quarter pretax charge for its portion of a foreclosure settlement announced earlier this week.
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