** 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

(Reporting by Manya Saini in Bengaluru)

((Manya.Saini@thomsonreuters.com ; X: manya__saini))