Public sector lender Canara Bank's profit in October-December quarter increased 279 percent to Rs 322 crore compared with Rs 85 crore in year-ago period, but asset quality worsened further on sequential basis. Profit was lower-than-expected due to higher tax & provisions and slow NII growth despite sharp increase in other income and operating profit.

Net interest income, the difference between interest earned and interest expended, declined 4.5 percent to Rs 2,374.8 crore compared to year-ago period due to 1.6 percent fall in advances (at Rs 3.24 lakh crore). Deposits on yearly basis grew only 1.25 percent to Rs 4.79 lakh crore during the quarter.

The bank said other income increased 4.3 percent year-on-year to Rs 1,383.3 crore while operating profit fell 5 percent to Rs 1,646.55 crore in Q4.

Asset quality weakened further during the quarter. Gross non-performing assets (NPA) as a percentage of gross advances increased to 9.97 percent (from 9.81 percent QoQ) and net NPA rose 9.72 percent (from 6.69 percent) in Q3.

While addressing press conference, Canara Bank chief Rakesh Sharma says the bank expects to bring NPA down to 5-6 percent by March 2018 and two big accounts are expected to be resolved by March 2017.

In absolute terms, gross NPAs were up 3 percent quarter-on-quarter at Rs 34,339 crore and net NPAs up 1.9 percent at Rs 22,296 crore in Q3.

Tax expenses during the quarter jumped 353.4 percent to Rs 175 crore compared with year-ago period.

 At 14:35 hours IST, the stock was quoting at Rs 276.70, down Rs 10.25, or 3.57 percent on the BSE.