Late last week, JPMorgan Chase warned investors that second-quarter profits would be less than expected.

FORTUNE — Wall Street’s profit woes are only just beginning.

Late last week, JPMorgan Chase JPM surprised the market by saying that slow trading in April could drag down the big bank’s profits in the second quarter. Bank stocks fell. But a new report suggests the banks’ bottom-line problems will persist long past June.

The analysis from The Boston Consulting Group, which was released on Tuesday, predicts that profits at Wall Street firms could drop by as much as 45% during the next two years. BCG does say Wall Street is likely to mitigate some of that drop through cost cutting, and cross-selling, but Wall Street has never been all that good at either of those things.

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Despite whining from some, the BCG report says that much of the profit drop on Wall Street, up until this point, has been due to lower revenues from a weak economy, not regulation. But that may be about to change.

BCG says the final adoption of Dodd-Frank, international capital rules, and other regulations will account for about 75% of the profit drop the consulting firm predicts during the next two years. But banks are also taking a hit from low interest rates, and while deal activity is picking up, overall revenue is still flat.

“The banks have not anticipated the drop in bond trading,” says Robert Grubner, a managing director at BCG. “No one expected it to be this severe.” What’s more, Grubner says Wall Street’s clients have gotten smarter, and the banks, in part because of regulation, are taking fewer positions. It could be a while before profits in bond trading, once a powerhouse for Wall Street, rebound.

All this is translating into lower salaries on Wall Street. BCG estimates that investment banks now pay their junior employees about 40% less than what they would earn at a private equity firm. In 2010, that gap was only 10%. Senior employees are paid 20% less, about double the pay gap for those individuals three years ago.

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In the end, BCG said the overall profit drop at the firms might not end up being as bad as they predict. Wall Street, though, has a lousy record when it comes to cost cutting. Operation expenses for all of Wall Street have actually gone up by about 10% since 2008, and that’s with the disappearance of Lehman Brothers and Bear Stearns.

Paradoxically, BCG suggests that big banks might want to look to cut costs in their risk management and audit offices, areas that banks have recently been bolstering. And it seems like they still need more help. Last week, Bank of America BAC said it was suspending its dividend because an accounting error had overstated the amount of capital it had to cover bad loans and investments by $4 billion. And Citigroup’s C request to up its dividend was rebuffed by regulators on account of weak risk controls.

JPMorgan CEO Jamie Dimon recently made a big deal about how much time and money his bank is spending making sure it is in compliance with regulators. That’s won applause from shareholders.

“Right now every dollar you spend on compliance translates into $2 in market cap,” says Grubner. “But it’s not sustainable.”