NEW YORK (Reuters) - Top U.S. banks must make deeper cost cuts to drive earnings growth, with revenue expected to remain under pressure for the foreseeable future, analysts said.

FILE PHOTO: The Citigroup Inc (Citi) logo is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada, Oct. 19, 2017. REUTERS/Chris Helgren/File Photo

Cost cutting was already a major driver of bank earnings for the first quarter. With the exception of JPMorgan Chase & Co, revenue fell at the biggest U.S. lenders as lower market volatility weighed on trading and recession fears dulled clients’ appetite for borrowing.

But Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc and Morgan Stanley still managed to beat analyst profit forecasts even as revenue slipped.

JPMorgan, the largest U.S. bank by assets, stood out from rivals by growing both revenue and profit. Wells Fargo & Co, which is operating under growth restrictions imposed by regulators, missed profit forecasts.

Some of the banks warned that growth in their net interest income, the difference between what they earn on loans and pay on deposits, will slow in 2019 thanks to a flatter yield curve and a moderating economy. The Federal Reserve in March signaled that it unlikely to raise interest rates this year.

With that major revenue source under pressure and the outlook on other business areas uncertain, expense controls may be the only reliable way for banks to boost profit, analysts said.

“There’s a very close watch on expenses right now and that will probably continue until there’s better visibility on revenue growth,” said Edward Jones analyst Jim Shanahan.

Shanahan said the potential for credit quality to deteriorate as the United States nears the end of the credit cycle also adds to the pressure for banks to get expenses in line.

“Credit can only really get worse from here,” he said. “That is going to be a headwind at some point and all the more reason for the banks to be trying to control their expenses.”

Banks were caught out by the Fed’s change of tack on rates and will need time to adjust their business models in response to the challenging revenue outlook, said David Hendler, an independent analyst at New York-based Viola Risk Advisors, which specializes in risk management.

“That’s going to be hard for them and you won’t see them adapting for two or three quarters. It’s a major headwind,” he said.

Banks are also juggling the need to support short-term earnings with making investments in the longer-term growth of their businesses.

JPMorgan was the only big U.S. bank that increased expenses as it spent more on technology, hiring bankers and marketing.

“JPMorgan is electing to invest in the business,” said Shanahan. “Its strategy is about leveraging the investments it’s already made in digital initiatives.”

Analysts and bankers said that any uptick in revenue across the sector is likely to come from banks’ trading operations. Equities revenues in particular fell sharply during the first quarter, but could improve if a return of market volatility spurs client activity.

“Going forward it’s going to be a function of markets,” Morgan Stanley’s Chief Financial Officer Jonathan Pruzan said in an interview on Wednesday. “Confidence is reasonably good and stock markets are reasonably stable.”

Another potential source of revenue growth would be an upturn in initial public offerings. Equity underwriting was dampened in the first quarter because of a U.S. government shutdown that held up regulatory approvals, but is expected to pick up as the backlog clears.

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“Already in the second quarter we’ve seen a major recovery in U.S. IPO volumes,” JPMorgan’s Chief Financial Officer told analysts on a conference call on Friday.

Most analysts are forecasting banks will achieve earnings growth of 7 percent to 9 percent over the full year, and expect cost cutting to be a major driver since they only see revenue growth of 1 percent to 3 percent.

Banks are also expected to keep buying back shares, which boosts earnings per share.

“The return of capital is a critical driver but one you don’t hear people talking about much,” said Marty Mosby, a bank analyst at Vining Sparks.

Mosby thinks concerns about sluggish revenue growth are overblown.

“There’s a disconnect between valuations and the steady-as-you-go earnings progression we’re seeing,” he said.