Morgan Stanley's New York headquarters are seen at the corner of 48th Street and Broadway in New York
Morgan Stanley's profit beat expectations despite the drop from a year earlier Reuters

Morgan Stanley's profit fell in the third quarter amid slower activity in mergers and acquisitions and initial public offerings.

Profit fell to $2.4 billion in the quarter ended in September, from $2.6 billion a year earlier, the bank said in a statement Wednesday. Despite the drop, the result still surpassed analysts' expectations, Reuters reported, citing LSEG IBES data.

The investment banking unit, which is responsible for M&As and IPOs, saw its revenue drop 27% from the same quarter last year to $938 million. That was partially offset by an increase of 4.6% in revenue from the wealth management division to $6.4 billion.

"Our ability to gather assets, together with our strong capital position and leading client franchises, position us to deliver continued growth and strong shareholder returns going forward," Chief Executive Office James Gorman said in a statement.

The earnings statement shows that the bank reduced the number of employees to 80,710 at the end of September from 82,006 at the end of the second quarter.

Economic concerns

Morgan Stanley is the last of the biggest Wall Street banks to report earnings.

Overall, profits beat expectations as the financial industry made more money from higher interest rates. Most banks flagged concerns on the slowdown in the economy and consumer spending.

The latest economic data show a different picture. Retail sales and industrial production, both released Tuesday, were higher than expected, indicating a resilient U.S. economy.

Recent surveys conducted by Mastercard and Deloitte pointed to expectations that consumers are willing to increase spending this holiday season.

The data will be analyzed by Federal Reserve officials before they meet on Oct. 31 and Nov. 1 to decide on interest rates. The Fed maintained its benchmark rate in the range of 5.25% to 5.5% on Sept. 20, signaling that another hike could be necessary this year.

Fed Chair Jerome Powell speaks Thursday about economic outlook at an event in New York.

Morgan Stanley