RBS Royal Bank of Scotland Group PLC

Citizens Financial Group Inc. on Friday said profit grew 16% in the third quarter, as lending and fee-based revenue increased.

Average loans increased 8% from a year earlier, to $96.8 million, driven by commercial lending. Retail loans also rose and were up 7% from last year's quarter.

The Providence, R.I.-based regional bank, which went public last October, took a $13 million hit in the prior-year quarter related to restructuring efforts and its separation from Royal Bank of Scotland PLC. In the latest quarter, Citizens recorded no restructuring charges. The bank said RBS's ownership fell to 20.9% during the quarter.

Increases in both interest income and revenue from fee-based businesses boosted revenue during the period. Many lenders have been crimped by prolonged low interest rates and have struggled with falling net interest margins. In the third quarter, Citizens held its net interest margin, an important gauge of lending profitability, steady at 2.76% and lifted it from 2.72% in the second quarter.

Noninterest income, meanwhile, grew 4% amid modest increases in card fees and trust and investment-services fees. Those increases offset declines in revenue from mortgage banking and foreign exchange. Lenders like Citizens have relied on fee-based revenue as low rates have hurt interest income, and they have also moved to cut costs.

Citizens said noninterest expenses dropped 1.5% from a year earlier and fell 5.1% from the previous quarter, due in part to the decline in restructuring charges. The bank has said it plans to cut expenses by $200 million by the end of next year, and Citizens' efficiency ratio improved to 66% from 70%.

Overall, Citizens earned $220 million, up from $190 million a year earlier. Its per-share profit rose to 40 cents from 34 cents. Revenue increased 4.1% to $1.21 billion. Analysts projected 40 cents in earnings per share and $1.21 billion in revenue, according to Thomson Reuters.

The lender's provision for potential loan losses was little changed at $76 million, reflecting continued improvement in credit quality.

Shares, down about 6% this year, were inactive premarket.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

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(END) Dow Jones Newswires

October 23, 2015 09:55 ET (13:55 GMT)

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