By Olivia Oran

NEW YORK, Jan 22 (Reuters) - Wall Street's two marquee investment banks each slightly cut their chief executives' pay after a year that saw profitability fall and shares drop amid a turbulent backdrop.

Goldman Sachs Group Inc Chief Executive Lloyd Blankfein and his Morgan Stanley counterpart James Gorman saw their overall compensation fall in 2015.

Blankfein's overall pay declined 4 percent from the year prior to $23 million, while Gorman's slid 7 percent to $21 million, the banks disclosed on Friday.

Both banks have struggled with tumultous markets that hurt bond trading and underwriting, concerns about oil prices and sluggish growth in China.

The pay declines come in contrast to a 35 percent raise for JPMorgan Chase & Co CEO Jamie Dimon. Dimon's compensation surged to $27 million, although the cash portion was cut and three quarters of the total was tied to performance-based stock awards.

Return on equity, a key measure of profitability, has been under pressure at both Goldman and Morgan. Goldman's return on equity in particular slumped to 7.4 percent in 2015, after a $5 billion settlement fourth-quarter hit related to its dealings with mortgage backed securities during the financial crisis.

Goldman typically leads peers with a return on equity of around 11 percent.

Rival Morgan Stanley, in contrast, generated a return on equity of 8.5 percent in 2015, below Gorman's target of 10 percent.

Morgan Stanley has tried to improve profitability in its fixed income division which has dragged down the firm's overall returns and said it would cut 25 percent of its headcount in the unit. It also announced a $1 billion cost cutting initiative to rely more on outsourcing and technology.

Shares of Goldman declined 8 percent in 2015, making it the second worst performer of all the big U.S. banks after Morgan Stanley, which fell 18 percent.

(Reporting By Olivia Oran in New York; Editing by Christian Plumb, Diane Craft)