Morgan Stanley's profit slipped 18% in the second quarter as Wall Street's deal-making drought stunted revenue from investment banking. Revenue from investment banking stood at $1.16 billion, in line with last year as Dealogic data showed global M&A activity fell 36% compared to a year ago.

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Still, its climb from the first quarter has sparked hopes of a nascent recovery.

CEO James Gorman cited a "challenging market environment," in the quarter, which "started with macroeconomic uncertainties and subdued client activity, but ended with a more constructive tone."

Morgan Stanley co-president Andy Saperstein had said in May that sales and trading "results will be notably down year over year versus a strong second quarter last year", while "investment banking is also very challenged".

Also Read: Bank of America profit jumps on boost from interest income, investment banking

The bank's revenue from asset management slipped 2%. The bank has set a target to increase assets under management to $10 trillion, it said in May, adding it was open to acquisitions.

Morgan Stanley's revenue climbed 2% to $13.46 billion while expenses rose 8% to $10.48 billion.

Profit applicable to common shareholders fell to $2.05 billion, or $1.24 per diluted share, the bank said on Tuesday. That is down from $2.39 billion, or $1.39 per diluted share, a year earlier.

Shares of the investment bank were up 1.4% in premarket trading.

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