Banking giant HSBC (LSE: HSBA) may garner all the headlines, but shares of the Asian-focused lender have dramatically underperformed those of under-the-radar challenger bank Virgin Money (LSE: VM) since the latter went public. Since its IPO in late 2014, Virgin Money shares have increased by 27% while HSBC’s have fallen by 34%.

Like nearly all of the UK’s large banks, HSBC has struggled mightily since the Financial Crisis due to high costs and increasing regulatory requirements. Unfortunately, unlike Barclays or Lloyds that can rely on the strengthening domestic economy to keep the top line in rude health, HSBC is now facing down a potentially dramatic slowdown in its key Asian markets of China and Hong Kong.

This slowdown will be creating major headaches in the C-suite as a full 83% of 2015 pre-tax profits came from Asian operations. And, the bank’s return on equity falling to 7.2% from 7.3% the year before and 9.2% in 2013 underlines the need for dramatic restructuring in non-core divisions. The failed sale of Turkish operations and management backpedalling on a proposed company-wide pay freeze will do little to bring down out of control costs, though.

The good news for shareholders is that core capital buffers rose to 11.9% from 11.1% and the $5.2bn sale of struggling Brazilian operations was arranged. Furthermore, while earnings only cover the staggering 8.2% divided 1.27 times, earnings are expected to finally begin growing again in 2017.

However, I believe HSBC is still years away from finally rewarding shareholders with share price appreciation. February’s announcement of a company-wide hiring freeze and the targetting of more than $4.5bn in annual cost-cutting shows just how unfocused and cost-insensitive the bank became in the boom years of the Commodity Supercycle in emerging markets. Righting these past wrongs will take time, and for now I believe there are better places for investors to park their money.

Quiet challenger

Virgin Money may not be as sexy as HSBC, but the relatively boring domestic lender brings to the table high growth prospects, a history of good management and a steadily growing top and bottom line. Virgin bought the government’s remaining stake in failed lender Northern Rock in 2011 and set about quickly and substantially cutting costs while simultaneously expanding market share.

Since the Northern Rock purchase in 2011, revenue has increased 223% while pre-tax profits have exploded an incredible 487%. Looking ahead, the company has ample prospects to continue this trend. While RoE of 10.9% in 2015 is 50% better than HSBC’s, Virgin is targeting RoE in the mid teens by 2017.

Furthermore, with only 2.5% of the domestic credit card market and 3.4% of the mortgage market, Virgin has considerable room to grow its top line in the years to come. With shares trading at a relatively sedate 11.2 times forward earnings, the company doesn’t trade at a pricey valuation. Add in a 1.8% yielding dividend covered more than five times by earnings, which tells us there’s considerable room to grow this payment, and Virgin Money is looking to me like a much cheaper, safer, and higher potential investment than HSBC.

Of course, Virgin Money's fate is tied to that of the domestic economy, which isn't a particularly diversified business model. For investors seeking a growth share with a more international perspective, I recommend reading the Motley Fool's latest free report, A Top Growth Share.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.