Lenders have been among the main beneficiaries of rising interest rates over the past two years, but these benefits are set to fade as central banks reach the end of this cycle of monetary policy tightening.

ABN Amro's NII, a key measure of earnings on loans minus deposit costs, fell 5% from the previous quarter, as deposit margins declined due to rising interest rates on savings accounts.

"ABN is getting a lower remuneration spread on its deposit base as it is paying back more to clients compared to previous quarters," AlphaValue analyst Sylvain Perret said.

The lender's NII stood at 1.53 billion euros ($1.63 billion) in the third quarter, up 20% from a year earlier but 6% below analysts' expectations in a company-provided poll.

J.P. Morgan said in a research note the miss implied lower than expected NII for 2024. Analysts on average have forecast NII of 6.5 billion euros for next year.

ABN Amro, one of three dominant banks in the Netherlands, said it expected higher costs for the coming year, mainly from data capabilities and the digitalisation of processes.

"Our capital cost target for 2024 is no longer achievable as we are faced with higher inflation and additional investments," CEO Robert Swaak said on a call with analysts.

The bank trimmed its 2023 cost expectation to a range of 5.1 billion to 5.2 billion euros, versus a prior forecast of 5.2 billion, reflecting delays in some investments to next year and finance regulations.

It posted a 2% rise in third-quarter net profit to 759 million euros, beating analysts' forecast of 583 million.

($1 = 0.9364 euros)

(Reporting by Gaëlle Sheehan and Matteo Allievi in Gdansk; Editing by Milla Nissi and Mark Potter)

By Gaelle Sheehan and Matteo Allievi