The major banks had a dismal stock-market performance in 2011. Some are positioned for a better showing this year, analysts say, though they could be outpaced again by their regional counterparts.

How bad was 2011? The KBW Bank Index fell 25% last year, while the KBW Regional Banking Index lost 7%.

Bank of America (BACwas the worst performing stock of the Dow Jones Industrial Average’s 30 components last year, with a drop of more than 58%. Citigroup (C) moved down 43%, while JPMorgan (JPM) had a roughly 20% decline.

BofA shares, now trading at about $5.50, were worth more than $14 each in early 2011.

Morgan Stanley (MS) trades at about $15 vs. $28 a year ago, and UBS (UBS) has declined to roughly $11.50 from $16.70 some 12 months earlier. Wells Fargo (WFC), however, has seen its shares maintain some stability: They trade near $27.70 today vs. about $31.60 in early 2011.

2012 Outlook

Keefe, Bryuette and Woods predicts little to no core revenue growth at BofA. It does, though, suggest that investors take some position in the universal-banking sector, which is building up its capital base slowly but surely.

“Progress is being made. Capital is growing, business models are adapting and risk is being reduced. However, issues related to European sovereign risk, mortgage legal issues, and subdued capital markets activity are taking a painfully long time to resolve,” said David Konrad and other analysts in KBW’s Universal Banks-2012 Outlook: These Things Take Time report.

“As a result, we expect the group to remain in a trading range over the near term and recommend investors be market-weight [with respect to] the group,” Konrad explained.

“Despite the underperformance in 2011, which left the group trading at 60% of tangible book value, we recommend investors … market-weight the group. Given the continued uncertainties, we recommend investors have a quality bias toward banks that have stronger balance sheets and better return on equity profiles. Our top names are JPM and [Goldman Sachs] GS. We remain most cautious on BAC.”

Regional Outperformance

KBW has taken an overweight stance on the regional banks for 2012.

“We believe this group has relative advantages versus its larger peers,” according to KBW analyst Jefferson Harralson and his team. “We believe the smaller banks have much greater license to return capital, have greater prospects for impactful M&A for both buyers and sellers, will have opportunities to increase market share from the large banks, and have no direct European exposure.”

Its top picks include the Bank of Marin (BMRC), People’s United Financial (PBCT) and BBCN Bancorp (BBCN).