Adds CEO comments on deals, private bank from paragraph 6

Oct 15 (Reuters) - Citizens Financial CFG.N posted a more than 29% third-quarter profit rise on Wednesday, driven by higher interest income and strong capital markets lifting advisory and underwriting fees.

An interest rate cut last month eased deposit costs amid labor market challenges and persistent inflation, while AI-driven investment has helped mitigate uncertainty surrounding tariffs, which led to a 20-year low in dealmaking in April.

Citizens' net interest income, the difference between what banks pay on deposits and earn as interest on loans, rose to $1.49 billion for the three months ended September 30, from $1.37 billion a year ago.

It reported quarterly profit of $494 million, or $1.05 per share, up from $382 million, or 77 cents, a year earlier, while its net interest margin expanded by 23 basis points, signaling strength in a key measure of banks' profitability.

The results mirror those of larger rivals such as JPMorgan Chase JPM.N and Goldman Sachs GS.N, which reported higher profits on Tuesday, fueled by a dealmaking resurgence.

Citizens Chairman and CEO Bruce Van Saun told Reuters the bank's capital markets revenue was the second biggest for a quarter in the company's history.

"It was (strong) across all the areas we play in - syndicated bank lending, strong bond deals, strong equity originations, and then really strong M&A," Van Saun said.

Asked if Citizens was looking for acquisitions given a recent pick-up in regional bank deals, he said the focus remains on building its existing business.

"We think we have some of the best organic growth prospects of anybody in the super regional space," Van Saun said.

Fifth Third FITB.O this month agreed to buy Comerica CMA.N in a deal valued at $10.9 billion, signalling increasing consolidation among regional banks.

Van Saun said Citizens' private bank is expected to contribute 7% to earnings this year and has the potential to double its contribution within three years.

Citizens launched the new private bank in 2023 and hired staff, including from First Republic Bank, which failed last year and was later bought by JPMorgan. It now has 500 people.

Its shares have risen nearly 16.7% in 2025, as of their last close, compared with a 17% gain in the KBW Bank .BKX index.

Citizens' stock was down 1.5% in afternoon trading.

(Reporting by Ateev Bhandari in Bengaluru and Saeed Azhar in New York; Editing by Vijay Kishore and Alexander Smith)

((Ateev.Bhandari@thomsonreuters.com;))