(Bloomberg) -- Investors should start snapping up some regional bank stocks that were battered by this year’s selloff, Citigroup Inc. analyst Keith Horowitz said.

Horowitz initiated coverage of Huntington Bancshares Inc. and Zions Bancorp with buy ratings after their shares tumbled by more than 25% this year, pulled down by concerns about the finances of regional lenders following the collapse of Silicon Valley Bank and Signature Bank.

The analyst stayed constructive on the broader industry, saying there’s been increasing clarity around where net interest income is heading and the proposed regulatory changes around capital requirements. He said the one wild card is how well loans perform, though he thinks any losses will be lower than some fear. 

“Now is the opportune time to buy regional banks,” he wrote in a note. “We remain constructive on the sector given our view that the best time to buy bank stocks is the transition from late-cycle to early-cycle when we believe credit will fare better than market concerns.”

Horowitz’s picks rallied on Friday, with Zions gaining 2.8% and Huntington up 1.9%.

Bank stocks were pummeled earlier this year amid concerns the industry was falling into a crisis. But they largely failed to recover as those concerns faded and the broader market rallied. That’s left the KBW Bank Index down about 22% this year, a sharp contrast to the 12% gain for the S&P 500 Index. 

There’s still concerns about the industry, with Morgan Stanley analyst Manan Gosalia warning earlier this week that mid-sized banks are “not out of the woods yet.”

And while Horowitz gave buy ratings to Zions and Huntington, which have underperformed the broader sector this year, he doled out neutral recommendations on First Citizens BancShares Inc. and New York Community Bancorp Inc. 

First Citizens and New York Community surged this year following takeovers of Silicon Valley Bank and Signature after they collapsed. As a result, Horowitz said he sees less upside, but acknowledged his recommendations are running “contrary to consensus.” 

Only one other analyst among nine tracked by Bloomberg has a hold-equivalent rating on First Citizens and a majority have buy calls on New York Community as well. Horowitz’s top pick among regional firms continues to be KeyCorp, which has tumbled 38% this year.

“While we agree that both NYCB and FCNCA are well positioned after very attractive acquisitions, we see better opportunity in ZION and HBAN which is reflective of our view that the regional banks look attractive here,” he wrote. “One should be playing offense, not defense.” 

(Updates throughout to market close.)

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