With a greater-than-expected $2.5 billion fourth-quarter loss, San Francisco-based Wells Fargo is proving no bank is immune from the credit crisis, even though it has come through the storm in relatively stronger shape.

Wells Fargo (nyse: WFC - news - people ) is steeling itself for rising loan losses, packing $5.6 billion away in credit reserves and tripling its credit provision to $8 billion. It wrote off $37 billion of risky Wachovia (nyse: WB - news - people ) assets that had been part of a $90 billion pool of troubled loans.

Wachovia's fourth-quarter numbers weren't consolidated into Wells Fargo's results. It had a disastrous $11 billion loss in the period. That said, it beat the $23 billion third-quarter loss, which prompted Wachovia's sale in the first place.

The merger and extra reserving pressured capital ratios. Though still well capitalized, Wells Fargo's 7.9% Tier 1 ratio is on the low end of large U.S. banks even though Wells said it was keeping its 34-cent quarterly dividend intact and wouldn't need any more capital out of the Troubled Asset Relief Program.

Other banks, including Citigroup (nyse: C - news - people ) and Bank of America (nyse: BAC - news - people ), have slashed their dividends almost to nothing after getting government money out of the TARP program.

Analysts said Wells Fargo's own loan portfolios, especially its exposure to the rough California real estate market, indicate signs of further stress ahead. Charge-offs as a percentage of loans rose to 2.69% from 1.96%.

"This shows that the recession is driving increased loan defaults--even in the more conservative Wells Fargo portfolio--and does not bode well for the industry or the economy at large," said Bart Narter, an analyst at Celent.