“Our base case sees revenues down about 10% in 2016, putting ever greater pressure on management teams to act,” said the joint study by Morgan Stanley and Oliver Wyman.

Such a fall would leave fixed income, currencies and commodities (FICC) revenues down about 30% since 2013 and wholesale banking fee pools lower as a proportion of GDP than at any time since 1995, apart from during the financial crisis.

European banks are expected to continue to underperform their US rivals, Morgan Stanley said. “This keeps intense pressure on banks to squeeze further on costs, reduce scale and/or exit lower-return areas. Restructuring plans already in place will likely need to be further refined,” it said.

Many banks will fail to meet their cost of capital in the next two years, especially those in Europe, the report said. That is likely to see about 5% market share up for grabs as banks sharpen their decisions on which products, regions and clients to cut, it said.

Reshaping operating models and removing costs could improve return on equity by 2-3 percentage points, but could take at least three years, the report said.

European wholesale banks will still struggle to achieve their cost of equity over the next two to three years, after an average return of 8% last year, hurt by negative interest rates, the need for restructuring and reduced scale, the Morgan Stanley analysts estimated. RoE at US banks is predicted to remain at around 11%-13% in 2016/17.

Further significant shrinking of balance sheets is likely as there remains too much capacity in the industry, even after a US$4trn-$5trn reduction in balance sheets since 2010.

European banks are expected to cut their risk-weighted assets by another 10% in 2015-17. US banks are expected to increase RWAs by about 2% in 2017 compared with 2015 as banks shift out of FICC and into loan balances and equities, Morgan Stanley forecast.