(Bloomberg) -- Deutsche Bank AG is preparing staff for a tough bonus season.

Variable pay “will reflect performance in 2023,” Chief Financial Officer James von Moltke said in a Bloomberg Television interview at the World Economic Forum in Davos on Tuesday. “And as you have seen in a number of different areas of the investment banking business in particular in 2023, it has been a difficult market.”

The comments are the first concrete glimpse into Deutsche Bank’s thinking about bonuses after a harsh year for investment banking. The unit’s revenue declined 12% during the first nine months of last year as trading slowed and M&A activity slumped, with revenue from deal advisory plunging 46% despite a hiring spree.

Investment banking tends to account for the lion’s share of Deutsche Bank’s overall bonus pool. Last year, it was close to half of the total.

Chief Executive Officer Christian Sewing said in October that cutting variable compensation was one lever he could use to reduce expenses if that was necessary to meet targets. 

Sewing has promised to boost the lender’s efficiency to a cost-income ratio below 62.5% by the end of next year, with a large chunk of that coming from cost cuts. The metric stood at 72.4% in the third quarter.

“We and our competitors want to pay for performance and work hard in managing our incentive compensation structures to do that,” von Moltke said on Tuesday. 

Deutsche Bank is scheduled to report full-year results on Feb. 1.

Read more: Live coverage from the World Economic Forum at Davos

--With assistance from Verena Sepp.

(Adds context on costs in the sixth paragraph)

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