CORRECTED-UPDATE 1-Australia's NAB cash profit falls 6% as loan repayments crawl

(Corrects paragraph 1 to clarify that 16% of home loan deferral customers the bank had contacted had started repayment, not 16% of all home loan customers.)

Aug 14 (Reuters) - National Australia Bank Ltd reported a 6.1% drop in quarterly cash profit as it increased provisions to cover coronavirus-led loan losses, and said about 16% of home loan deferral customers the bank had contacted had started repayment.

NAB said on Friday it booked bad debt charges of A$570 million during the quarter, up from A$247 million last year, bringing the total to A$1.73 billion for the year to date.

Cash profit at the country’s third-biggest lender fell to A$1.55 billion ($1.11 billion) for the quarter ended June 30 from A$1.65 billion as reported last year. The figure still beat a Citi estimate of A$1.26 billion.

“The COVID-19 pandemic continues to challenge our customers and our bank... The outlook remains highly uncertain,” Chief Executive Ross McEwan said in a statement.

By Aug. 5, NAB had contacted about 40% of all customers who had availed a home loan to check if they wanted to opt out of a deferral scheme offered earlier this year to help cope with the pandemic.

The bank said 84% of those customers chose to extend their repayment holidays, with McEwan conceding that many customers still faced an uncertain future.

NAB said it would be increasingly challenging to meet its target of broadly flat expenses for the year and warned that virus-related outlays would affect cost growth in 2021.

Rival Commonwealth Bank of Australia on Wednesday slashed its annual dividend by more than half and reported lower-than-expected profit. ($1 = 1.3992 Australian dollars) (Reporting by Shashwat Awasthi and Anushka Trivedi in Bengaluru; Editing by Devika Syamnath)