In today's announcement at the World Economic Forum in Davos, Deutsche Bank CFO James Von Moltke hinted at the possibility of less-than-stellar bonuses for 2023. Citing a "difficult year," Von Moltke indicated that Deutsche Bank's bonuses would be reflective of the company's overall performance.

The investment bank has faced challenges in various areas, with results for the fourth quarter of 2023 set to be reported on February 1st. Notably, revenues in M&A have nearly halved in the first nine months of the year, while fixed income trading has experienced a 13% decline compared to the previous year. Furthermore, Deutsche Bank reported lower fixed income trading revenues in Q3, specifically in rates, FX, and emerging markets.

The decline in revenues within rates trading may be attributed to market conditions, but it could also be connected to the departure of several rates traders from Deutsche Bank. Last year witnessed the exit of high-profile traders such as Kilian Frensch, who moved to Nomura, Eren Ozgur, who joined hedge fund Alphadyne Asset Management, Josh Hooker, now at BlueCrest, and Daryl Li, also at BlueCrest with Hooker. These departures seemingly followed the exit of head of rates trading Guy Winkworth, who joined Barclays in June.

The trend of rates trader departures from Deutsche Bank persists, with Alessandro Iannelli, an inflation trader, recently resurfacing at NatWest Markets in London. Inflation traders are currently in high demand, potentially deterring Deutsche Bank from significantly reducing its upcoming bonuses. Goldman Sachs, for instance, has been losing its own inflation traders to hedge funds like Millennium and DE Shaw, highlighting a robust hiring market for such talents.

Last year, Deutsche Bank reduced its investment bank bonus pool by 8% and paid an average material risk-taker €1.6 million. However, it appears that this year's bonus pool may experience another decrease. It is worth noting that Deutsche Bank made significant investments in hiring senior investment bankers throughout 2023, yet the results have yet to materialize. Additionally, the bank paid £410 million to acquire UK brokerage firm Numis, resulting in significant wealth for the founders. A senior banker from a rival firm dryly remarked that the potential bonus cuts may be well-received given the attention surrounding the Numis Ferrari headlines.

As the financial industry eagerly awaits the release of Deutsche Bank's Q4 results, the uncertainty surrounding the future of bonuses at the bank continues to draw attention.