The State Bank of Pakistan has finally allowed the Fauji Foundation to acquire majority shares of the Askari Bank, banking sources told Dawn.Established in 1991, the Askari Bank was being run by the Army Welfare Trust, but the bank came into trouble from the beginning of last decade.

“We have issued NOC to the Fauji Foundation that allows the foundation to acquire the Askari Bank,” said SBP spokesman Syed Wasimuddin.Market sources said the Askari Bank would be jointly acquired by the Fauji Foundation, the Fauji Fertilizer and the Fauji Fertilizer Bin Qasim.

The price of shares has not yet been negotiated or finalised. The finalisation of prices would complete the acquisition of the Askari Bank.The State Bank had granted approval to Fauji Foundation to commence due diligence of Askari Bank in January 2012. Bankers said the Askari Bank would find a better chance to grow since the foundation has strong footing in terms of assets and finance.

The bank faced tough times as its profitability was hurt during the last few years despite improvement in 2011.The bank earned a profit-after-tax of Rs1.628 billion in 2011 which was 73 per cent higher than last year’s profit of Rs943 million.

The Askari Bank has a network of 245 branches and sub-branches, including 31 dedicated Islamic banking branches. As on Dec 31, 2011, the bank had an equity of Rs17.8 billion and total assets of Rs343.8 billion.

The Askari Investment Management Limited and the Askari Securities Limited are subsidiaries of the Askari Bank, primarily engaged in managing mutual funds and share brokerage, respectively.

A senior banker said one of the reasons for trouble of the Askari Bank was the non-performing loans which put pressure on the bank to adopt a cautious approach but it also hurt its profitability.He said the scenario has not changed yet despite the fact that a stronger group, like Fauji Foundation, is going to take over the bank.

“Banking activities are extremely restricted these days in Pakistan and is limited only to raise deposits. Banks don’t lend money to market players for higher returns.Instead, they put their money in government papers at lower returns,” said the senior banker.

Bankers said the large banks have enough room to remain profitable by just investing into government papers, but the middle and small size banks find it hard to use their money “smartly.”Bankers said smartly means to lend money to the right borrower at a higher rate with minimum risk.Banking analysts also believe that the Askari Bank would require aggressive approach to get its place back with higher profits and low infected portfolio.