The retail banking unit of Dutch lender ABN AMRO has posted underlying profit of €328m for the third quarter of 2016, up 3% compared to €319m in the third quarter of 2015.

The bank said that the rise in profit was mainly driven by lower loan impairments, which offset lower operating income and higher expenses.

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Compared to the year ago, the division's operating income dipped 1% to €976m, while net interest income remained almost stable at €851m.

Operating expenses at the unit were €524m for the period, a rise of 3% from €510m in the prior year.

The retail banking segment’s cost/income ratio increased by 2 percentage points year-on-year to 53.6%.

Overall, the banking group posted underlying profit of €607m for the third quarter of 2016, an increase of 19% from €509m during the same quarter in 2015.

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ABN AMRO Group chairman of the managing board Gerrit Zalm said: “We now want to take another step forward in delivering in-depth expertise in a digitally savvy way to our clients and will increase our expenditure on initiatives for growth, innovation and digitalisation by EUR 0.4 billion by 2020 compared with 2015. To finance these initiatives and offset cost inflation and levies of approximately EUR 0.5 billion, we target cost savings of a similar amount (EUR 0.9 billion) by 2020.

“Building on our Q2 cost initiatives, we have identified further cost savings of EUR 0.4 billion. This will affect approximately another 1,500 FTEs. These savings come on top of the EUR 0.2 billion for the support and control activities (announced in Q2 2016) and the EUR 0.3 billion (on track) for TOPS 2020 and Retail Digitalisation. We have sharpened the cost/income target range from 56-60% by 2017 to 56-58% by 2020.”