UPDATE 2-ABN Amro shares fall as bank stays wary of COVID impact

* ABN third-quarter net profit higher than expected

* ABN says impairments to remain elevated in 2021

* Net interest income to continue faling in fourth quarter

* Shares trade down 5.5% (Recasts with share price reaction, cautious outlook)

AMSTERDAM, Nov 11 (Reuters) - ABN Amro shares fell almost 6% on Wednesday, as the Dutch bank said it remained cautious despite reporting a much better than expected third-quarter profit helped by relatively low coronavirus-related impairments. The bank, which is largely state owned, reported on Wednesday a net profit of 301 million euros ($355 million) for the third quarter, down 46% year-on-year but almost three times higher than analysts had expected.

Loan impairments jumped to 270 million euros from 112 million euros a year earlier but that was significantly less than the 500 million euros analysts pencilled in for the period.

“The reason it’s been so relatively positive is because of the government support,” Chief Financial Officer Clifford Abrahams told Reuters.

“That can’t go on forever. Our expectation is that there will be further impairments when that government support phases out. In our core markets that’s likely to be next year.”

ABN lowered its forecast for the write-offs in 2020 to around 2.5 billion euros from 3 billion euros.

It also said net interest income was set to decline further to around 1.4 billion euros in the last three months of 2020, following a 10% drop to 1.47 billion euros in the third quarter.

“The guidance on net interest income and impairments for 2021 read below consensus, but we see room to surprise on costs for 2021”, ING analyst Albert Ploegh wrote in a note.

ABN Amro shares, which have lost half their value since the start of the year, traded down 5.5% at 0855 GMT in Amsterdam.

ABN’s core capital adequacy ratio was roughly stable at 17.2% at the end of September, but Chief Executive Robert Swaak said this did not mean dividend payments could automatically be resumed next year.

“The payout of the accrued full-year 2019 dividend will be considered prudently at full-year 2020, taking into account the status of the ECB dividend recommendation as well as conditions and prospects at that time,” he said.

The European Central Bank has recommended banks refrain from paying dividends until at least Jan 1 2021.

Net profit in the third quarter was helped by a book gain on the sale of ABN’s office building in Paris, which was partly offset by costs for winding down its corporate bank activities.

$1 = 0.8469 euros Reporting by Bart Meijer; Editing by Tom Hogue and Muralikumar Anantharaman