Aldermore (LSE: ALD) has slumped by 6% today after releasing first-half results. The challenger bank has performed well during the period, but faces uncertainties due to its UK exposure. For now, results look good: its pre-tax profit increased by 50% in the first half of the year, with its net interest margin being stable at 3.6%. Its underlying cost/income ratio improved by 8 points to 45% from 53% in the same period of last year, which highlights that Aldermore remains well-managed and highly efficient.

Furthermore, Aldermore was able to record a return on equity of 18%, with its loan origination increasing by 26% to £1.5bn. And with a core tier 1 ratio of 11%, it’s well-placed to overcome the challenges that lie ahead.

UK vulnerabilities

On that topic, Aldermore and other challenger banks such as Shawbrook (LSE: SHAW) face a very uncertain future. Their UK-focus means they’re particularly vulnerable to a UK recession. While this may or may not come to fruition, it now seems almost inevitable that the UK’s economic performance will falter over the next couple of years. The Bank of England is certainly of that view. It recently downgraded the growth outlook for the UK economy in 2017 from 2.3% to 0.8%. This is the biggest downgrade to the growth forecast by the Bank of England since 1992.

Of course, an economic slowdown will bring reduced demand for mortgages and other loans, while increased unemployment will cause default rates to rise. This could impact negatively on the financial performance of Aldermore and Shawbrook, which means that investors may be better off buying a more geographically diversified bank such as HSBC (LSE: HSBA).

Global focus

HSBC operates across the globe and is exceptionally well diversified. Although a UK recession would hurt its financial performance, it wouldn’t be as severe as is the case for Aldermore and Shawbrook.

Clearly, HSBC isn’t risk-free and is undergoing a challenging period as it seeks to rejuvenate its financial performance. As part of this, it’s in the middle of a major cost-cutting and efficiency programme that could expand margins and improve profitability. However, the reality is that in the near term, HSBC’s profit is due to fall by 15% in the current year and as a result, its shares may come under pressure in the near term.

Looking further ahead, HSBC is likely to record strong bottom line-growth. Its exposure to the Asian economy is set to positively catalyse its financial performance since financial product penetration is low and increasing wealth is likely to improve demand for mortgages and other financial services across the region. Furthermore, China is transitioning towards a more consumer-focused economy where credit will be demanded in greater quantity. HSBC is well-placed to capitalise on this.

Therefore, due to its greater diversification and exposure to fast-growing markets, HSBC seems to be a better buy than Shawbrook and Aldermore. It may not be performing as well as those two highly efficient, fast-growing banks right now, but external factors may cause the tables to turn over the medium to long term.

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Peter Stephens owns shares of HSBC Holdings. 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.