Morgan Stanley managed to record a profit increase of more than 40 percent in the second quarter, but the company's wealth management showed slower growth.

The company's net profit amounted to $3.1 billion in the quarter, compared to $2.2 billion in the previous year, surpassing analysts' expectations.

This increase was supported by a rise in investment banking fees of just over 50 percent compared to the previous year, reaching 1.6 billion US dollars.

The resurgence of the investment banking business has been a recurring theme in the results of major banks over the past two quarters. After two years in which investors held back on acquisitions and IPOs due to rising interest rates, investment banking revenues at JPMorgan increased by 50 percent and at competitor Goldman Sachs by 21 percent in the quarter.

Morgan Stanley's CEO Ted Pick told analysts that unless a recession occurs, "I believe that we will see a resumption of normalized M&A activity in the coming quarters and really in the coming years.

The shares of Morgan Stanley rose by more than 2 percent in early trading on Tuesday in New York.

The company's asset management division, which manages $5.7 trillion, fell short of analysts' growth expectations. The bank was only able to attract $36.4 billion in new net assets, significantly less than the expected $57.5 billion and less than the nearly $90 billion in the previous year.

The new net assets in wealth management in the first half of 2024 were the lowest since 2020.

Morgan Stanley's CFO Sharon Yeshaya partly attributed the slowdown to higher tax payments as the tax filing deadline in the US ends in April. "We believe that both tax-related outflows and increased spending, particularly among wealthy clients, have impacted inflows this quarter," she told analysts.

Yeshaya explained that wealthy clients had made significant expenditures in the quarter, while JPMorgan, Citigroup, and Wells Fargo highlighted signs of financial stress among lower-income clients last week.

Wealth Management has been an important growth driver for Morgan Stanley in recent years, bolstered by the acquisition of the online trading platform ETrade in 2020. However, growth has recently slowed down as it has become more difficult to attract client funds when interest rates are higher.

The profit margins in this business have also shrunk because wealth management clients have been able to keep money in liquid products that offer higher returns in a higher interest rate environment but are less profitable for banks.