Moody's Investors Service dealt a fresh blow to the financial sector, downgrading more than a dozen global banks to reflect declining profitability in an industry being rocked by soft economic growth, tougher regulations and nervous investors.

The move hit five of the six biggest U.S. banks by assets, including Morgan Stanley, which had mounted a campaign to persuade Moody's not to cut its rating by three notches. It was downgraded instead by two.

The...