But Nedbank said the combined strength of the local banking system ensured that African Bank's resolution was successfully managed and that the bank was placed under curatorship with no "significant consequences" for the rest of the SA financial system.
Nedbank made its view when it released its full-year financial results to December 2014, which showed a 14% rise in full-year headline earnings to R9.88bn.
In its assessment of the domestic economy, Nedbank said the operating environment in 2014 remained challenging for consumers, with global markets reflecting a mixed performance, and the local economy remained under pressure from strike action and electricity supply constraints.
SA's gross domestic product (GDP) is forecast to grow at 1.4% for 2014, but in the absence of strike action, economic growth would have been 1% higher, the bank said quoting the South African Reserve Bank (SARB).
"Weak economic conditions, the twin deficits and SA's resultant dependency on foreign capital inflows translated into rand depreciation and heightened inflationary pressures in the early part of the year, prompting an increase of 75 basis points in interest rates," Nedbank said.
Looking ahead, Nedbank said the SA economy was forecast to improve modestly off a low base, although growth would be constrained by disruptions to power supply and weaker growth was anticipated in key export markets, particularly in the eurozone and China.
Growth in GDP was currently forecast at 2.5% for this year as the economy recovered from the effects of strike action and exports were boosted by a weaker rand, the JSE-listed bank said.
The sharp drop in global fuel prices had improved the inflation outlook and interest rates were expected to remain unchanged at current levels until late in the year, Nedbank said.
"The softer interest rate outlook and lower borrowing costs should support consumer credit demand and limit credit defaults in 2015, notwithstanding the weak job market and still high consumer debt levels," the bank said.
"Retail banking conditions are therefore likely to improve modestly, but growth in wholesale banking may moderate from current levels as fixed-investment plans and credit demand will be limited by the severity and extent of infrastructure constraints, rising production costs, soft global demand and low international commodity prices," Nedbank said.
Source: INET BFA
