Net Up at Wells Fargo, Other Big Banks : Earnings: Fewer bad loans and cost-cutting measures were cited.

Led by Wells Fargo & Co., several major U.S. banks on Tuesday reported strong fourth-quarter profits, indicating that aggressive measures to clean up bad loans and cut costs are starting to pay off.

A groundswell of enthusiasm from investors buoyed the bank stocks, with Wells setting the pace with a whopping rise of $13 a share, to $99, in trading on the New York Stock Exchange.

Wells, a San Francisco-based giant dogged by concerns about its hefty portfolio of California real estate loans, reported earnings of $58 million for the quarter ended Dec. 31, contrasted with a loss of $231 million for the same period in 1991.

The improvement resulted primarily from a decline in the reserves set aside to cover troubled loans.

“Across the board (in banking), you’re seeing a decline in non-performing assets,” said David S. Berry, an analyst with the Keefe, Bruyette & Woods investment firm in New York. “Improving credit quality is very good news for the industry.”

Others reporting improved results were Citicorp, Chemical Banking Corp. and Chase Manhattan Corp. of New York; First Interstate Bancorp in Los Angeles and Banc One Corp. of Columbus, Ohio.

Wells Fargo set its fourth-quarter provision for loan losses at $300 million, down from $400 million in the third quarter of 1992 and $700 million in the final three months of 1991.

But the bank also suggested that the shaky California economy and an ongoing portfolio examination by regulators could cause the figure to rise once more. “The California economy, particularly that of Southern California, continues to decline, and we remain cautious,” said Carl E. Reichardt, chairman and chief executive.

Wells reported a nearly 10% drop, to $2.65 billion, in the total of non-performing loans--those on which interest is not accruing or being paid--from the third to the fourth quarter. However, analysts noted that most of the decline was in business loans rather than real estate loans.

“They’re still nervous about some of their (real estate) credits,” said John D. Leonard, senior banking analyst with Salomon Bros. He added that investors “may have overreacted” in their optimism.

Michael Murphy, a short seller who edits the Overpriced Stock Service newsletter in Half Moon Bay, Calif., was skeptical of the bank’s report: “It was a complete fake. Southern California real estate has gotten worse. It’s just not credible that they are not suffering” larger loan losses.

Other banks reporting were:

* Citicorp: The nation’s largest bank said fourth-quarter earnings were $280 million, contrasted with a loss of $133 million in the previous year’s period. The bank attributed the improvements to decreased costs from layoffs and other cost-cutting moves.

* Chemical: Fourth-quarter net income rose to $304 million, contrasted with a loss of $420 million. That loss resulted primarily from a $625-million restructuring charge in the 1991 quarter. Chemical merged with Manufacturers Hanover in early 1991.

* Chase Manhattan: Fourth-quarter profit rose to $169 million from $135 million a year ago. The improvement resulted in part from an 11% rise in interest revenue and higher fees and commissions.

* First Interstate: Net income rose to $82.1 million in the fourth quarter, contrasted with a loss of $59.9 million in the previous year’s quarter. The bank’s reduction of non-performing assets exceeded expectations.

* Banc One: Earnings in the quarter were $193 million, up from $151 million, as troubled loans and foreclosed real estate fell.

The Associated Press contributed to this story.