The luxury travel bookings will be more subdued, as will the purchases of $200,000 Aston Martins and vacation homes. Splurges on expensive bottles of wine and jewelry will be less spontaneous. For many bankers, it might not be the most wonderful time of the year.

Annual bonuses — one of the most hotly anticipated numbers on Wall Street — were expected to be down as much as 50% for 2022, as investment banks grapple with declining revenues following a sharp drop in their main businesses of lending, mergers and acquisitions advisory and initial public offerings. With a possible recession in the offing, next year might not look much better.

In a recent management committee meeting, David Solomon, CEO of Goldman Sachs, told executives to brace for a steep drop in bonuses, a possible recession and a continued slowdown in banking activity that could last through at least the second half of 2023, according to a person with knowledge of the meeting.

The two top executives at Jefferies Group, another investment bank, warned employees to expect a drop in pay. “This is going to be a more difficult compensation season at Jefferies, just like it will be for every firm in our industry,” the bank’s CEO, Richard Handler, and president, Brian Friedman, wrote in a memo.

They implored employees to think about compensation over a longer time horizon rather than compare it with a year ago. They wrote that 2021 “was the type of year that comes along very rarely in a finance professional’s career.” It was more appropriate to compare this year’s bonuses to 2019, they wrote.

Bonuses have long been part of the attraction to working on Wall Street. Getting a big one is affirmation of good performance, while a smaller one could be a signal to look for a job elsewhere. One former senior banker at a major bank, who was not authorized to speak publicly on behalf of his former employer, recalled that he would call each banker in his group to a conference room with opaque glass windows to deliver the bonus number. That way, colleagues wouldn’t see a banker’s reaction.

Base salaries for senior bankers can range from hundreds of thousands to millions of dollars, while their bonuses can be double or triple their base. The median household U.S. income, by comparison, was $70,784 last year.

But bonus pools — or the total amount of money earmarked for bonuses at investment banks like Goldman Sachs and Morgan Stanley — rise and shrink with economic activity, meaning that even top performers can take home a smaller amount in a bad year.

And 2022 was not been a good year. The bread-and-butter business of investment banks — mergers and acquisitions, initial public offerings and lending — has taken a beating as rising interest rates and fears of a recession prevented many companies from making bold moves.

Investment banking revenue in the United States was expected to have dropped more than 50% from last year, to nearly $35 billion through mid-December, according to data provider Dealogic. It’s a sharp contrast to 2021, one of the busiest years for deals and the most lucrative for investment banking revenue in more than a decade. In 2021, banks generated nearly $71 billion in U.S. investment banking revenue, according to Dealogic.

In October, food delivery company Instacart pulled plans for an initial public offering amid market turmoil, and cut its valuation from $40 billion to $24 billion. The business of taking special purpose acquisition companies public, which had brought banks billions of dollars in fees in recent years, also petered out.

Few analysts or bankers expect a sharp rebound in investment banking revenue in 2023, so cutting bonuses is a key way for banks to rein in costs, especially because compensation is one of Wall Street’s biggest expenses — and bonuses account for a large portion of it. “Wall Street always says it has variable expenses to go with variable revenues,” said Mike Mayo, a longtime banking analyst at Wells Fargo. “It’s time to prove it.”

The bonus pool at some of Wall Street’s largest banks — Goldman, JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Barclays — was expected to drop 30% to 50% from 2021.

CEOs at Wall Street banks will be walking a fine line as they seek to cut bonuses while also trying to retain top bankers who can bring in business.

The best performers are likely to see smaller declines from last year’s bonuses, more in the range of 10%, according to banking industry representatives. A large number of bankers will see their bonuses decrease by up to 80%. Some might get no bonus at all, which could push employees to leave and limit the number of layoffs banks are planning for next year.

“Wall Street CEOs have to balance profitability with growth,” Mayo said. “We’re not modeling boom times ahead.”