Wall Street firms can make more by cutting costs more

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

Bloomberg News reports 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% and shed more than 20,000 jobs.

The five major U.S. investment banks generated $70bn 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.

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.

To access the complete Bloomberg News article hit the link below:

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