One of South Africa's largest banks, Nedbank, has been hit by bad debts, it said in its first quarter 2009 trading update on Thursday.

"The credit environment remains challenging with the group's impairment charge increasing by 108.2 percent from R881-million for the period to March 2008 to R1.83-billion in the current period," Nedbank said.

The situation was due to retrenchments and falling residential property prices, Nedbank said.

However, the company remained "solidly profitable" posting a 6.6 percent rise in net interest income to R4.13-billion.

Nedbank said, however, that profit in 2009 would be down from the previous year but added the group was "well positioned to grow when market conditions improve and interest rate reductions translate into lower consumer impairments".

Nedbank said South Africa's economy remained in a stronger position than many developed countries as the fiscal authorities had remained disciplined and still had room to reduce interest rates to stimulate growth.

"Household demand should gradually begin to respond to lower interest rates and more manageable debt levels," it said.

According to Nedbank, South Africa would receive an economic boost from the 2010 Fifa World Cup, and several other large international sporting events taking place prior to that.

The bank said government and parastatal infrastructure programmes, of which many had already been initiated, would continue to boost the economy and should support moderate corporate asset growth.

Nedbank said that South African banks remained strong and well capitalised, and continued to lend.

Sapa