By Selena Li and Scott Murdoch

HONG KONG/SYDNEY (Reuters) -Standard Chartered said on Friday uncertainty created by the impact of trade tariffs boosted its clients' activity in the first quarter but warned that major deals could be put on hold if the trade tensions persisted.

The bank's cautious stance provided more evidence of how the impact of U.S. President Donald Trump's tariffs could weigh on long-term dealmaking and hit lenders' income, after a busy first quarter when clients rushed to hedge risks.

StanChart on Friday reported a 10% profit rise in the first quarter, ahead of analysts' forecasts, as a strong performance from its wealth, markets, and global banking businesses boosted revenue, while net interest income fell from the previous quarter on a constant currency basis.

"Momentum (in the second quarter) has continued from the high levels of volatility that the market is experiencing," Diego De Giorgi, the bank's chief financial officer told reporters.

Clients have been particularly active with "tactical" moves so far, which he said referred to them using the bank's "flow business" to manage their exposure to currencies, commodities or to rates.

"Obviously we remain watchful of longer term ... execution of more strategic deals in banking that might be delayed if uncertainty remains elevated," the CFO said, referring to client activity.

StanChart's Hong Kong-listed shares paired earlier gains, after rising as much as 4.2% to a 5-week high after the results, and were last up 0.7%. The benchmark Hang Seng rose 1.7%.

Its London-listed shares were down 0.8% by 0915 GMT.

The bank took a credit impairment of $219 million in the quarter, up 24% from a year earlier. The bank set aside $23 million in relation to the heightened uncertainty around trade tariffs.

Other major banks have highlighted the threat to economic growth and credit quality from the trade tensions. HSBC, which reported results earlier this week, forecast worsening loan demand and credit quality in the wake of rising trade tensions.

WEALTH BUSINESS

StanChart, which focuses on Asia, Africa and the Middle East, reported first-quarter pretax profit of $2.1 billion, versus $1.91 billion a year ago, which was ahead of $1.91 billion forecast by analysts.

The results showed "notable strength" in the bank's wealth business, Jefferies analysts said in a research note.

"We remain of the view that the current tariff uncertainty is ultimately a growth issue not a credit one," they said.

The bank's wealth business reported 28% first-quarter income growth, while its global markets and global banking businesses delivered increases of 17% and 14% respectively.

StanChart has said it will target $200 billion in new assets and double-digit growth in income from its wealth business over the next five years, as part of its wider strategy to shift to higher fee-earning businesses.

StanChart's net interest income in the first three months of this year fell 5% from the previous quarter on a constant currency basis.

The bank flagged a challenging outlook for net interest income given the current interest rate environment and economic landscape.

(Reporting by Selena Li in Hong Kong and Scott Murdoch in Sydney; Additional reporting by Sinead Cruise in London; Editing by Christopher Cushing and Jane Merriman)