NEW YORK (CNNMoney.com) -- Wells Fargo reported a $2.6 billion fourth-quarter loss Wednesday, hurt by its acquisition of Wachovia and rising credit costs. But excluding a host of charges, many of them related to the merger, earnings beat Wall Street estimates.

The San Francisco-based bank posted a loss of 79 cents a share, down from $1.36 billion, or 41 cents a share, during the same period a year ago. Excluding the numerous charges, the company would have reported a profit of 41 cents. That topped consensus estimates of 33 cents per share on that basis.

Wells Fargo chief financial officer Howard Atkins said in a statement that a big addition to the company's credit reserves, as well as a $3.9 billion provision related to its purchase of Wachovia, were the main reasons for the quarterly loss. He called the loss "disappointing."

But the company also revealed Wednesday that it had no plans to ask for additional government capital. Wells received $25 billion last year from the Treasury Department.

The bank added it would not cut its dividend, even as some analysts speculated the company would have to do so in order to conserve capital.

That news helped send Wells Fargo (WFC, Fortune 500) stock sharply higher. Shares of the bank, which have lost 45% of their value so far this year, soared nearly 28% higher in afternoon trading.

Bank stocks were broadly higher Wednesday on speculation that the Obama administration was finalizing plans to create a so-called "bad bank" that would purchase toxic assets from large financial institutions.

Many investors had feared in recent weeks that conditions in the banking industry had become so severe that the government may have to nationalize some banks.

"That cloud seems to be lifting now," said Brian Gardner, an analyst for investment firm Keefe, Bruyette & Woods. "People are starting to understand what the administration is generally going to propose."

A closer look

After several of its peers, including Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500), reported substantial losses in recent weeks, many analysts were anticipating the worst from Wells Fargo.

Driving those fears was the company's all-stock purchase of Wachovia, which was announced in October and completed in December.

Had Wachovia remained an independent company, it would have reported a loss of $11.2 billion in the fourth quarter.

Wells Fargo moved to clean up Wachovia's books during the quarter, taking $37.2 billion in writedowns on nearly $94 billion of high-risk loans.

Top executives at the bank seemed encouraged about the progress being made on the merger, saying it was, for the most part, ahead of schedule.

"I feel better about this deal now than I did when it was first announced," Wells Fargo CEO John Stumpf said during a recorded investor conference call Wednesday.

Nonetheless, the deteriorating U.S. economic environment, marked by higher unemployment, weighed on Wells' results, particularly in its home equity loan and its credit card portfolios.

Overall net charge-offs, or loans a bank doesn't think are collectable, more than doubled from a year ago.

"That's not pretty because Wells has been so much more conservative than many others," said Bart Narter, an analyst for the Boston-based financial research and consulting firm Celent.

Wells, along with rival JPMorgan Chase (JPM, Fortune 500), has been viewed as one of the better-run big banks during the ongoing crisis. The company's profits have beaten Wall Street expectations for the past three quarters.

But in a sign that the economy could deteriorate further, Wells Fargo said it set aside a total of $5.6 billion during the quarter to cope with future loan losses, with $3.9 billion of that total tied to the Wells-Wachovia merger.

The company also revealed it was not immune to the Ponzi scheme allegedly committed by Bernard Madoff, adding that it took $294 million in charges during the quarter related to the fraud.