April 16 (Reuters) - Citizens Financial CFG.N reported a fall in first-quarter profit on Wednesday, hurt by lower interest income amid economic uncertainty.

U.S. President Donald Trump's trade policies have sparked concerns over rising inflation and a potential recession, weakening consumer confidence and possibly dampening loan demand and spending.

Its a sharp shift from the optimism at the start of the year, when the banking sector surged on expectations of robust loan growth and a revival in deal-making on hopes of deregulation under the new administration.

Some of the biggest U.S. banks such as JPMorgan Chase JPM.N, Bank of America BAC.N and Citigroup C.N were able to bolster their quarterly profits through strong equities trading amid volatility in the markets.

But regional lenders tend to have smaller trading operations, which restricts their ability to take advantage of market turmoil during such volatile periods.

Excluding one-time costs, Citizens Financial earned 77 cents per share for the three months ended March 31, compared with 79 cents a year earlier. Analysts, on average, were expecting earnings of 75 cents per share, according to data compiled by LSEG.

Citizens' net interest income — the difference between what banks pay customers on deposits and earn as interest on loans — fell to $1.39 billion from $1.44 billion a year earlier, due to a decline in average interest-earning assets.

The Providence, Rhode Island-based bank's capital market fees also decreased 15% to $100 million, due to lower M&A activity.

Citizens decreased its provision for credit losses to $153 million in the first quarter from $171 million a year earlier.

The bank's stock has lost nearly 17.5% this year, until last close.

(Reporting by Prakhar Srivastava in Bengaluru; Editing by Krishna Chandra Eluri)

((Prakhar.srivastava2@thomsonreuters.com;))