The strong results in the fourth quarter helped the bank make $15.9 billion in profit for 2011.  This is an increase of 28% from 2010.  Profit gains were limited by declining revenue, as new federal regulations continued to weigh on revenue at banks.  Fourth-quarter revenue at Wells Fargo fell to $20.6 billion from $21.5 billion for the same period a year earlier.

The wholesale banking unit, which includes the sales and trading business and the corporate lending unit, earned $1.6 billion in the fourth quarter, down 3% percent from the fourth quarter of 2010.  The bank continued to dominate the mortgage market, controlling more than a quarter of the market with a loan total of $769.6 billion in 2011, up from $757.3 billion at the end of 2010.  “We like lending,” Mr. Sloan said, adding that “we want to grow.”

The results indicate that Wells Fargo is weathering the uncertain economy better than its competitors are.  The company’s loan portfolio has recently showed signs of improving, as its nonperforming loans declined roughly 20% from the fourth quarter a year earlier.  The bank recently made the decision to set aside $600 million less in reserves to cover soured loans.

Wells Fargo has an edge over Wall Street titans that run large investment banking operations because the company is better shielded from the rampant volatility in the markets.  Citigroup reported a disappointing 11% decrease in fourth-quarter earnings and JPMorgan Chase said its fourth-quarter profit declined 23%.  Investors welcomed the report and sent the bank’s shares up nearly 1% after the announcement.

The regulators claimed that Wachovia generated illicit gains of millions of dollars in fraudulently rigged municipal bond transactions occurring in 25 states and Puerto Rico.  Wachovia is accused of rigging the bidding process for investments, causing municipalities to pay more for securities than fair market value.

States, cities, and counties raise money for needed projects such as building roads and repairing schools by selling bonds to investors with the help of banks.  The funds that are not immediately used are generally invested with the help of the bank until the funds are needed for the project.

Some of the bids that Wachovia won were obtained through a practice known as “last looks”, where an agent releases information about competing bids to the company.  Other bids were won through a practice known as “set-ups”, where a bidding agent deliberately obtains non-winning bids to tilt the field in Wachovia’s favor.

The Securities and Exchange Commission said that the rigged transactions occurred over an 8-year period and involved at least 58 rigged bidding competitions.  Robert Khuzami, Director of the SEC’s Division of Enforcement, said, “Wachovia won bids by playing an elaborate game of `you scratch my back and I’ll scratch yours,’ rather than engaging in legitimate competition to win municipalities’ business.”

The settlement calls for Wells Fargo to pay $46.1 million to the Securities and Exchange Commission, $34.5 million to the Office of the Comptroller of the Currency, $8.9 million to the Internal Revenue Service, and $58.75 million to a group of state Attorneys General.  The company said the required payments would not affect its financial results adversely.

A separate case in federal court was settled by Wells Fargo last month in New York regarding similar allegations brought by several states.  Wells Fargo paid $37 million in that settlement.  Wells Fargo released a statement stating that it was pleased to have resolved the matters and noted that the transactions in the case had been conducted by employees who are no longer employed by the company.

These cuts come as banks confront a difficult capital markets environment, sluggish economic growth, and new regulations crimping revenue from consumer banking.  According to a Reuters tally, more than 120,000 jobs have been cut in the banking industry worldwide this year.  Banks often target technology when they are looking to tighten their belts because the reductions can be invisible to customers.

Employees in a server management group that employs about 500 have been told that the company is planning to cut about 25 staff and eliminate 30 unfilled positions in their department.  Project Compass, the efficiency program the company launched at the end of last year, will eliminate jobs as well.  Project Compass’s goal is to reduce quarterly expenses from about $12.5 billion in the second quarter of this year to $11 billion in the fourth quarter of 2012.

Wells Fargo is the fourth largest U.S. bank by assets but the second largest by employees.  Wells spokesman Ancel Martinez said that the bank might add staff to some groups even as it cuts from others and that laid-off employees can seek jobs in other parts of the company.  The bank has not disclosed a specific number of jobs to be cut and the bank spokesman said he could not provide details because “outcomes are not final.”  The company has around 263,800 full-time employees.

The bank is trying to cut costs by operating more efficiently.  Centralizing some staff functions and simplifying the company’s technology operations are part of the program being implemented by Wells Fargo to achieve this goal.  The bank has technology hubs in Scottsdale, Arizona; Charlotte, North Carolina; Minneapolis, Minnesota; and San Francisco, California.