Jan 21 (Reuters) - Citizens Financial Group CFG.N reported a 31.7% surge in fourth-quarter profit on Wednesday, helped by recovery in capital markets activity that boosted underwriting fees.

Federal Reserve rate cuts and easing concerns over the impact of tariffs have boosted commercial activity, encouraging companies to pursue refinancing and expansion plans, lifting demand for underwriting and loan syndication.

The Providence, Rhode Island-based bank posted total non-interest income of $620 million in the reported quarter, up 8% from a year ago.

Its capital markets fees jumped 16% to $140 million, helped by higher debt and equity underwriting and loan syndication fees.

However, the U.S. government shutdown weighed on capital markets activity during the quarter, delaying regulatory approvals and stalling deal timelines as key agencies operated at reduced capacity, prompting companies to defer transactions.

Citizens' wealth fees surged 31% during the October-to-December period, boosted by growth in asset under management, mainly driven by net inflows.

The bank's provisions for credit losses fell 15.4% to $137 million in the quarter.

The bank's net interest margin, which measures the profitability of lending operations, increased to 3.07% from 2.87%.

Citizens' net interest income — the difference between what banks pay customers on deposits and earn as interest on loans — rose 9% to $1.54 billion from a year ago.

It reported a net profit of $528 million, or $1.13 per share, in the three months ended December 31, compared with $401 million, or 83 cents, a year earlier.

Shares of Citizens Financial rose 1% premarket after the results. They gained 33.5% in 2025, outperforming the KBW Banking Index .BKX.

(Reporting by Prakhar Srivastava in Bengaluru; Editing by Shilpi Majumdar and Shailesh Kuber)

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