Profit and revenue fell at Morgan Stanley (MS) during the first quarter, another sign of how challenging the period was for some of Wall Street's giants as deal making dried up and a banking crisis upended markets.

Its first-quarter profit of $2.98 billion was down 19% from the year-ago period. Revenue was down 2%, to $14.52 billion. Both were up compared with the fourth quarter.

Its investment banking revenue, which includes underwriting of IPOs as well mergers and acquisitions advisory work, fell 24% from a year ago and was flat when compared to the fourth quarter.

Its stock ended Wednesday up less than 1%.

A number of other big banks, including Morgan Stanley rival Goldman Sachs (GS), also said investment banking fees were down during the quarter. Trading at Morgan Stanley was also down 26%, an even deeper drop than Goldman experienced.

The beginning of the year was chaotic on Wall Street as investors fretted over rising interest rates from the Federal Reserve, an ongoing war in Ukraine and the failures of two sizable regional banks in March.

Morgan Stanley CEO James Gorman told analysts on a conference call Wednesday that he expects one and possibly two more interest rate increases from the Federal Reserve and the possibility of a "modest recession." If inflation isn't tamed, rates could go "much higher than people are expecting," but he doesn't consider that a likely outcome at this point.

He predicted 2023 would end on a "constructive" note for his firm. There are stresses in the economy, he said, citing weaknesses in commercial real estate, but "it actually feels surprisingly benign from what economic stress could have been."

"It kind of reminds me of that Rolling Stones song: 'you can't always get what you want. But you get what you need.' I think about Morgan Stanley coming out of this and we're kind of getting what we need," he said, citing "decent revenue, decent earnings."

"I think we're very well positioned on a go-forward basis."

What helped Morgan Stanley during the first quarter was its wealth management division, an area of increasing focus for Gorman. It attracted new assets and reported a rise in net interest income, which is the difference between what a bank makes on its assets and pays out in deposits.

Many banks have been benefitting from a rise in interest rates by charging more for their loans. Morgan Stanley said its net interest income increase was the result of "higher interest rates and bank lending growth."

But it was also not immune to an outflow of deposits affecting most financial institutions as customers seek higher yields. Its deposits were down 3.7% from a year ago and 2.5% from the fourth quarter.

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