Wall Street banks just eked out their most profitable year since before the financial crisis by slashing budgets. Can they top that?

The sobering answer for many is that they can -- if they cut even deeper than they did in 2015, when they reduced costs by 13 percent and shed more than 20,000 jobs. The five major U.S. investment banks generated $70 billion of net income in 2015 by shaving expenses to the lowest level in seven years, according to data compiled by Bloomberg. They’ll have to continue paring to keep the streak going, at the risk of slicing into muscle and bone.

“I don’t think there is any magic wand on the expense front that any of these guys can wave,” said Charles Peabody, an analyst at Portales Partners LLC.

Already, 2016 has been nothing if not turbulent. Equities had their worst start to any year on record, buffeted by worries over China’s economic slowdown and a plunge in global oil prices. The higher interest rates that’ll enable banks to charge more for loans may be pushed off by a Federal Reserve unwilling to risk damaging the economic recovery. Bond trading, long the biggest single engine of Wall Street profits, looks to be permanently curtailed by new rules forcing firms to hold more capital against risky assets.

‘No Excuses’

Giants like Bank of America Corp. have largely stuck with their we-do-everything business models on the belief they can manage the risks posed by their complexity to achieve higher profits. Only JPMorgan Chase & Co. and Goldman Sachs Group Inc., the banks earning the most revenue from Wall Street, have managed to hit a key mark in the industry, generating a return on equity of at least 10 percent. Those that can’t improve their returns this year will face pressure to shrink, or at least pull back from more businesses.

“Banks need to have double digit ROEs -- no excuses,” said Mike Mayo, an analyst at CLSA Ltd. who published a note three years ago saying many of the biggest banks would be worth more if they were broken up into smaller pieces.

Already, firms such as Morgan Stanley are retreating from fixed-income trading. More will do so as the industry confronts new regulations that have to be implemented in 2018 and 2019, Goldman Sachs Chief Financial Officer Harvey Schwartz said Wednesday. Morgan Stanley -- which has struggled to reach Chief Executive Officer James Gorman’s target of 10 percent return on equity -- said it’s cutting one-quarter of its fixed-income trading staff to help it reach that mark by 2017.

European banks also are carrying out major reductions. London-based Barclays Plc has started a fresh round of cuts at its investment bank, with plans to eliminate more than 1,000 jobs worldwide, people with knowledge of the matter said this week. Frankfurt-based Deutsche Bank AG plans to shrink headcount by 26,000, or a quarter of its workforce, as it restructures. And Zurich-based Credit Suisse Group AG has said it will trim some 5,600 jobs across the U.S., the U.K. and Switzerland as part of a cost-cutting overhaul.

The probability of another rate increase by the Fed in March dropped to 24 percent this week, compared with 51 percent at the beginning of the year, according to futures traded on the Fed funds rate. Expectations for a rate hike have been pushed to at least September, the first month with a higher-than-50 percent probability.

‘Tough Year’

The biggest Wall Street banks finished 2015 by boosting fourth-quarter net income to the highest level since 2006, under generally accepted accounting principles.

For the full year ahead, analysts predict three of them will earn less than in 2015, according to estimates compiled by Bloomberg, with only Goldman Sachs and Bank of America projected to turn in higher profits. The five’s aggregate profit is estimated to remain unchanged at $70 billion.