In a statement, CEO James Gorman said the first quarter represented "solid momentum." He's been investing in the wealth management unit, emphasizing products like home loans, and steering the purchase of the rest of Morgan Stanley Smith Barney, the retail brokerage it owns with Citigroup.

Gorman, the CEO since the start of 2010, is under pressure to restore Morgan Stanley's share price and measures of profitability, including its return on equity. His direction for the bank is borne from previous losses: Risky investment banking activities slammed Morgan Stanley in the financial crisis, and regulators are phasing out some of the investment bank's old sources of revenue, like trading for its own profit.

The CEO's response has been to expand the bank's work with individual investors. That business can provide a steady source of revenue even when financial markets are volatile. A big part of that plan is the retail brokerage, Morgan Stanley Smith Barney. Morgan Stanley is in the process of buying out Citi's remaining 35 percent stake, and said it plans to do so by the end of this year.

Under the plan, the bank's different units are also being encouraged to work together. For example, the investment bank usually deals with companies and other institutional clients, helping them broker deals or trading on their behalf. But those corporate clients also have executives who would make prime customers for the wealth management unit, which advises individuals as well as small and medium-sized companies.

Thursday's results reinforced the shifting focus. The wealth management unit accounted for about 41 percent of revenue, after stripping out an accounting charge. Three years ago, when Gorman took over, it accounted for 34 percent.

Wealth management's profit margins and income tend to be more reliable and steady. Analysts said they were pleased that the wealth management unit's pre-tax profit margin was better than expected at 17 percent. That's the highest it's been since Morgan Stanley formed the joint brokerage with Citigroup, and it's been steadily rising since 2009. The investment bank's profit margin was higher, at 20 percent, but it's swung widely in recent years: 39 percent three years ago, and 12 percent two years ago.

Nomura analyst Glenn Schorr said the quarter "showed progress."

"A mixed bag at the (investment bank) isn't so bad," he wrote in a note to clients, "when wealth management is so much better (and about to be bigger)."

Still, investors appeared to expect more progress: The company's stock price fell 62 cents, or 3 percent, to $20.85 in morning trading.

—The investment bank: Revenue from trading bonds and commodities for clients fell, a common theme for banks this earnings season. The bank also made less money advising companies on strategies like mergers and acquisitions, but it did underwrite more stock and bond offerings.

Revenue fell 14 percent to $4.4 billion, after stripping out an accounting charge. Profit was down 30 percent to $1.1 billion.

—Wealth management: The wealth management unit brought in more fees, and clients moved more assets to Morgan Stanley. The revenue that each representative brings in has been steadily rising, and this quarter amounted to an annualized rate of $851,000, up from $780,000 a year ago.

Revenue was up 5 percent to $3.5 billion. Profit jumped 48 percent to $597 million.

—Expenses: Like most of its peers, Morgan Stanley has been cutting back on spending, including office space, equipment and marketing. The amount the bank spent on salaries, bonuses and benefits fell 5 percent. Headcount was down 7 percent, with the bank cutting about 3,900 jobs.

—It's the economy: Gorman sounded a cautiously hopeful note about the world economy. He said it "continues to have moments of fragility." But, he added, "we believe the broad economic outlook for the next several years is stronger than in the recent past." Chief Financial Officer Ruth Porat said that the market's uneven performance in recent weeks is another reminder that "global economic recovery and market healing may not come in a straight line, even as major economies are clearly on firmer footing than just a year ago."

—By the numbers: Earnings totaled $1.2 billion, down from $1.3 billion. Per share, those earnings amounted to 61 cents, beating the 57 cents expected by analysts polled by FactSet.

Revenue was $8.5 billion, down from $8.9 billion. That beat analysts' expectations of $8.3 billion.

The earnings and revenue exclude the effect of an accounting charge related to the value of the bank's debt.