Green but not gold: US regional banks log 2025 gains, lag broader rally

U.S. regional bank stocks head for a green 2025, but trail large-cap lenders and wider market

KBW Regional Banking Index .KRX up ~4.4% so far in 2025, lagging a ~31.3% rise in the S&P 500 Banks Index .SPXBK and a ~17.3% gain in the S&P 500 .SPX

Regional bank stocks came under selling pressure in the fall following fraud-related credit losses at two U.S. regional lenders that rippled through global markets

Analysts later dubbed the episode a "mini crisis", saying the selloff reflected a knee-jerk investor reaction to one-off events rather than evidence of systemic credit risks

"We believe strong capital levels should enable continued buybacks and a favorable regulatory backdrop could improve strategic flexibility," analysts at Jefferies wrote in a 2026 outlook note earlier this month

The brokerage added it expects regional banking sector consolidation to continue and "perhaps accelerate" next year

Its top picks include: Citizens Financial CFG.N, Fifth Third FITB.O, Axos Financial AX.N, Western Alliance WAL.N, East West Bancorp EWBC.O, Valley National VLY.O and Flagstar Financial FLG.N

Though the selloff rekindled memories of the 2023 regional banking crisis, analysts say the sector is heading into 2026 on stronger footing

State Street SPDR S&P Regional Banking ETF KRE.P up ~8.4% YTD, through previous close

Elsewhere on Wall Street, broader financial sector index .SPSY has gained ~14.2% in 2025, as of last close