Goldman Sachs Group and Morgan Stanley have emerged from the carnage on Wall Street fitter and ready for a long battle to survive in the brutal jungle of global banking.

Goldman and Morgan Stanley became bank holding companies after investors lost confidence in their brash, high-risk investment model. They are also busy stockpiling capital, sacrificing near-term results as they focus on getting through the worst crisis in international finance since the Great Depression.

Goldman recently announced deals that will raise $15bn (£8.5bn) from Warren Buffett's Berkshire Hathaway investment vehicle and public investors. Morgan Stanley has agreed the sale of a 20% stake for roughly $8.5bn to Japan's Mitsubishi UFJ Financial Group, one of the world's largest banks.

The two renowned investment banking firms decided to morph into traditional bank holding companies, accepting onerous federal regulation in exchange for much-needed access to cash reserves.

The move is like an insurance policy and is aimed at shoring up investor confidence in the two companies. It will stave off the type of pressure from the market that brought down Bear Stearns and Lehman Brothers and will let Goldman and Morgan Stanley acquire deposits. However, this new-found stability comes at the cost of stricter regulation and slimmer returns.

"They are both saying it will be easier, and they'll see more opportunities, with more capital," said Gary Townsend, a veteran analyst who runs hedge fund Hill-Townsend Capital. "But commercial banking is not easy and the level of leverage allowed is quite a bit different from what they're used to."

Two companies who said they had plenty of capital and the right business model are now raising piles of cash and changing the way they do business.

US financial sector analysts said the two newly-minted banks will be forced to rein in risk and use less leverage - the very tools that made Wall Street so enormously profitable.

"We will see high to mid-teens returns on equities. The days of 30% return on investments are behind us," said Brad Hintz, an analysts at broker Sanford C Bernstein.

In buying a stake in Goldman, Buffett, the billionaire who once condemned Wall Street's "casino mentality", returned to the gaming table 11 years after his last bet ended.

This time he has put down more money - $5bn for a holding in New York-based Goldman, compared with a $700m investment in Salomon in 1987. And this time he has made sure his odds are even better.

Taking advantage of fragile markets, his gold-plated reputation and Wall Street's thirst for cash, the 78-year-old chief executive officer of Berkshire Hathaway extracted a 10% dividend on his preferred Goldman shares and made an instant paper profit of $437m from warrants. That is better than Salomon, which returned 9% on his preferred shares and where Buffett had to step in as interim chairman to guide the securities firm through a government investigation.

The buzz around Wall Street has it that Goldman's plan to sell a stake to Buffett was a closely held secret with only about 20 people involved in the deal.

One analyst said Goldman chief executive Lloyd Blankfein has paid a heavy price to get Buffett's money.

"For Goldman Sachs, the blue chip of financials, the terms of this deal seem exorbitantly expensive and provide insight into how truly challenging current market conditions are," Oppenheimer & Co analyst Meredith Whitney wrote in a note to investors.

Buffett's investment has helped lift Goldman's shares, but even so the tough times for banks are far from over. The conditions that brought down Lehman and insurer AIG in the first place - a slowing economy, too few deals and illiquid debt markets - have not improved.

"The willingness to raise a lot of capital . . . suggests that Goldman's management has a bleak outlook on the environment," Sandler O'Neill analyst Jeff Harte said in a research note. "We remain cautious on the outlook for the near-term operating environment."

The two firms also face Federal Reserve demands for greater disclosure about their trades and investments.

"We're certainly at the end of an era. The higher-risk, high-reward strategies that the investment banks utilised are certainly going to be tamed," said John Challenger, head of Challenger Gray & Christmas, who tracks job and salary trends.

Embracing the bank model also opens the door to some new opportunities.

Flush with $1.1 trillion in assets, Goldman intends to snap up assets and deposits from distressed banks seized by the Federal Deposit Insurance Corporation or the federal bailout plan. Goldman does not intend to acquire large banks.

By comparison, Morgan Stanley already has a significant retail financial business through its 8500 brokers and three million wealth management clients.

Morgan Stanley has some $989bn of total assets and has said it will expand its retail banking business.

It also expects an alliance with Mitsubishi, the world's second-largest bank by deposits, will give it a real boost.

For now, even the newly-empowered and capital-rich Wall Street firms are holding back from buying banks.

"Given the difficulties in valuing potential targets due to rising credit problems and significant market-to-market accounting issues," RBC Capital Markets analysts wrote, "we believe strategic buyers such as Goldman and Morgan will probably remain on the sidelines for now."