Morgan Stanley Q2 profit falls 14% on deal-making drought

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macroeconomic uncertainties and subdued client activity, but ended with a more constructive tone". “The more promising tone and activity seen later in the quarter across many parts of our businesses is promising," Gorman said. Its revenue from investment banking was flat at $1.16 billion.

Trading revenue fell as volatility declined, with fixed income sinking 31% while equities fell 14%.   While more subdued markets weighed on trading, stabilizing market conditions had not yet spurred activity in capital markets, Chief Financial Officer Sharon Yeshaya said. Still, “we expect investment banking to lead the recovery in the next quarter," she said.

Morgan Stanley's earnings were also eroded by $300 million in severance costs after the bank laid off thousands of employees this year. Gorman announced in May that he would step down within a year. Morgan Stanley's board will focus on the selection Gorman's successor at its summer and fall meetings, a person familiar with the situation told Reuters last month.

Among the three top candidates are Ted Pick, the company's co-president who leads its investment banking and trading arm, and co-president Andy Saperstein, who runs wealth management. Although the results of the business units have diverged, Gorman has stressed their performance is not the only consideration for CEO selection. The bank's wealth management unit reported record net revenue of $6.7 billion, 16% higher than a year earlier.

It gained $90 billion in new assets in the second quarter. Revenue from investment management, run by the third CEO candidate, Dan Simkowitz, slipped 2%. Morgan Stanley's shares rose almost 1% in early trading.