Wells Fargo & Co reported higher fourth-quarter earnings as the bank set aside less money to cover bad loans.

The fourth-largest U.S. bank by assets said it earned 73 cents per share. The average estimate from analysts was 72 cents per share, according to Thomson Reuters I/B/E/S.

Net income applicable to common shareholders was $3.89 billion (2.53 billion pounds), compared with $3.2 billion, or 61 cents per share, a year earlier.

The San Francisco-based bank recorded a loan-loss provision of about $2 billion, which was down from about $3 billion a year earlier. For the seventh straight quarter the bank reversed reserves the bank had previously booked for bad loans.

The bank's total loans increased about $9.5 billion from the end of September to $769.6 billion at the end of December. The loan growth mirrored a trend shown when JPMorgan Chase & Co reported earnings on Friday.

Wells Fargo said it purchased 27 million shares of its common stock in the fourth quarter, plus an additional 6 million shares through a transaction that will settle in the first quarter of this year.

I'm extremely pleased with Wells Fargo's performance in 2011 - including strong deposit and loan growth, record cross-sell and record earnings, Chief Executive Jon Stumpf said in a statement.

(Reporting By Rick Rothacker in Charlotte, North Carolina, editing by Dave Zimmerman)