Banks have been struggling to generate more revenue for years, while adapting to a panoply of new regulations that have raised the cost of doing business substantially.
The biggest challenge has been fixed-income trading, where heavy capital requirements, new derivatives rules, and restrictions on proprietary trading have made it less profitable, leading most banks to simply shrink the business.
Bank executives have already warned investors to expect major declines across other areas as well.
Citigroup CFO John Gerspach said to expect trading revenue more broadly to drop 15 percent versus the first quarter of last year. JPMorgan Chase's Daniel Pinto said to expect a 25 percent decline in investment banking. Several bank executives have warned about declining quality of energy sector loans.
Global investment banking fees for completed merger and acquisitions, and stock and bond underwriting, totaled $15.6 billion in the first quarter, a 28 percent decline for the year-ago period, according to Thomson Reuters data.
Volatility in stock prices and plunging commodities prices caused trading volume to dry up during most of the quarter. Trading activity picked up slightly in March but was not strong enough to offset declines during the first two months of the year.
Analysts have been lowering first-quarter estimates over the last month in light of business pressures. They now expect JPMorgan to report adjusted earnings of $1.30 per share, Bank of America to report 24 cents per share, Wells Fargo to report 99 cents per share, Citigroup to report $1.11 per share, and Morgan Stanley to report 63 cents per share. Goldman is expected to report $3.00 per share, the lowest first-quarter earnings since before the financial crisis.