A bank producing healthy profits and discussing future growth prospects is currently as rare as a 100 per cent mortgage offer, but Standard Chartered has emerged from the gloom to announce pre-tax profits up 19 per cent to a record $4.8 billion (£3.4 billion) last year and confirm it has enjoyed a strong start to 2009.

Standard Chartered is now Britain’s second largest bank by market capitalisation even though most people have never heard of it. The bank, which is headquartered in London, has no branch on any British high street, but has a presence in more than 70 countries, predominantly in Asia from where two thirds of its business derives.

It is this geographic distribution that is serving Standard Chartered well. While its key markets are not immune to the current financial crisis, and product sales have already declined in these areas, levels of debt are lower compared to their Western counterparts, companies are in better shape and the balance sheets of governments have not been wrecked by expensive bank bail-outs.

Indeed, Asia learned the lessons of excess during the emerging market crisis of the 1990s, when Standard Chartered suffered as a result of its exposure to the region. As a result, Sands believes that, while Asia will certainly experience a sharp cyclical slowdown, it will not be long-lived.

But the real key to Standard Chartered’s success is that it has stuck to the business of banking. While others dabbled in exotic derivative products and acted as quasi hedge funds, it continued to offer personal and commercial banking services to its clients.

And, as chief executive Peter Sands never tires of saying, Standard Chartered never took liquidity for granted. Managing liquidity is always a crucial aspect of banking. Institutions take short-term deposits but make long-term loans, and if this is not managed correctly then, as other banks have found out, it can be the difference between survival and collapse.

While other banks lent out more than they had on deposit, Standard Chartered has taken a different approach. Since the crisis started in August 2007, it put a greater emphasis on liquidity and offered incentives to boost customer deposits while, at the same time, reducing the maturity of its loan book.

Indeed, the consumer bank’s deposit book rose 21 per cent over the year but the need to pay more to attract deposits in the second half knocked between $30million and $40million from revenues in the final six months. But at Sands himself points out, it is currently better to strengthen long term liquidity at the expense of short term profits.

Standard Chartered was also very proactive in managing the credit risks of its loan book. The bank tightened underwriting standards and reduced unsecured exposures, and (importantly) turned away the business of more than 900 mid-market existing clients that it now deems too risky.

Today, its assets (or loans) are worth 75 per cent of its deposit book, down from 86 per cent a year earlier, which means that it has a healthy buffer for many eventualities. It also means that Standard Chartered can act as a lender to other banks, and its unique position allows it to charge hefty penal rates.

Admittedly, the bank surprised investors last November when it launched a £1.8 billion rights issue to boost capital reserves having previously declared its balance sheet was strong. But Standard Chartered did so not from a position of weakness. Its capital ratios were already strong, but investors were starting to reappraise the appropriate levels of capital for financial institutions. Similarly, with other banks and companies launching rights issues, the window to access investors would not be open long. As it was, 97 per cent of investors took up their rights to the share issue and Standard Chartered’s core Tier 1 capital ratio, a key measure of strength that indicates how much capital a bank has on its balance sheet relative to the size of its loan book, stood at 7.6 per cent at the end of 2008, up from 6.6 per cent a year earlier.

But there are some worrying aspects in Standard Chartered’s results. Profits from consumer banking halved in the second half of the year compared to the first six months as customer confidence declined, which suggests operating profit from that division barely grew over 2008. In wholesale banking, operating profits fell 15 per cent between the first and second half but still ended the year at $3 billion. The key now, according to Sands, is to deepen the relationship with corporate customers. Last year, income from the bank’s top 50 corporate clients rose 45 per cent, and he believes there is further potential growth particularly as many key competitors have now retreated from the marketplace. Income from wholesale banking during the first two months of 2009 is already ahead of last year.

Despite these negative factors, Richard Hunter, head of UK equities at Hargreaves Lansdown, points out Standard Chartered is now the best performing UK bank. ‘The bank has cited its Asian strategy, staying with banking basics and being open to business, as strands for its success. It does nonetheless realise that the slowdown of Asian economies will continue to present challenges, although not perhaps to the extend of the developed western world,’ he says.

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