The retail banking arm of Dutch lender ABN AMRO has reported an underlying profit of €399m for the second quarter of 2016, a jump of 17% compared to €342m a year earlier.

The bank said that the rise in profit was mainly driven by improved operating income (including a one-off book profit) partly offset by higher expenses.

The unit's operating income was €1.08bn, a rise of 15% from €946m in the second quarter of 2015.

Net interest income at the unit increased 6% to €855m from €809m in the prior year, while operating expenses increased 10% to €536m.

The retail banking segment’s cost/income ratio was 49.5% in the second quarter, down 2 percentage points from 51.5% a year ago.

Overall, the banking group recorded underlying profit of €662m for the second quarter of 2016, up 10% from €600m in the prior year. The banking group’s reported profit for the period however, slid 35% year-on-year to €391m, driven by a one-off charge on interest rate derivatives.

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 ABN AMRO Group chairman of the managing board Gerrit Zalm said: “We are well on track with three of our financial targets: an ROE of 10-13% over the coming years, a CET1 ratio of 11.5-13.5% and a dividend payout ratio increasing to 50% over 2017. The underlying net profit for H1 2016, which excludes an additional provision for SME interest rate derivatives, was flat at EUR 1,136 million.

“Continued growth of our capital base – the fully-loaded CET1 ratio increased to 16.2% – caused the ROE to decline to 13.1%, above the target range. We will pay an interim dividend of EUR 0.40 per share, or 45% of the reported net profit. Once there is more clarity on Basel IV, we will update our strategic financial targets beyond 2017.”