* Review to be done by summer, sources say
* Barclays has already announced 12,000 job cuts for group
* Shareholders angry about bonuses and costs
* Shares fall 2.7 pct to 15-month low
By Steve Slater
March 13 (Reuters) - Barclays has launched the third review of its investment bank in as many years, and is likely to cut more jobs and business areas as it battles to improve profitability, people familiar with the matter said.
The review, already underway, will be completed by the summer. It will aim to cut costs and focus on whether the London-based bank should pull back harder in areas of fixed-income trading that use a lot of capital and have recently offered poor returns, the people said on condition of anonymity.
While investment banks across the world are struggling with tougher regulations and low interest rates, Barclays has faced particular problems after its business culture was singled out for criticism by British regulators and it was one of the banks fined for manipulating Libor benchmark interest rates.
New Chief Executive Antony Jenkins has pledged to improve both the bank's image and performance, but faces a tough task as the investment bank contributes almost half of group earnings.
Last month, he prompted an angry reaction from shareholders and the media by announcing a 10 percent hike in bonus payments for last year to 2.4 billion pounds ($4 billion), despite a one-third fall in group pretax profits.
Critics say Jenkins needs to get greater control over costs, especially after he said in a newspaper interview he had been forced to raise pay for investment bankers in the United States to prevent a "death spiral" at the division.
"He's being forced into this partly by the economics (of low interest rates) and by the regulatory handcuffs. But this review is important for shareholders as it's a chance for Jenkins to say this is my final decision on the investment bank," said Simon Maughan, head of research at OTAS Technologies.
Jenkins said last month he expected to cut 12,000 jobs across the bank this year, which fuelled speculation of several hundred or thousands of job losses among the investment bank's 26,000 staff.
The bank cut 7,650 jobs last year, including 1,400 in the investment bank, where it shed a further 400 staff last month, including many managing directors.
The Financial Times said the bank could oust the co-heads of the investment bank, Tom King and Eric Bommensath.
A spokesman for Barclays said there were no plans for any change in leadership at the investment bank. The bank declined further comment.
Barclays shares climbed in early Friday trading but were down 2.7 percent to 229.5 pence by 1225 GMT, their lowest for 15 months. The drop was in line with Europe's bank index.
Jenkins has repeatedly said he would keep a significant sized investment bank. However, previous reviews have yet to improve performance.
Return on equity - a measure of how well a company uses shareholder funds to generate a profit - fell to 8.2 percent at the investment bank last year from 12.7 percent in 2012.
That was also below the bank's 10.5 percent cost of capital, which includes interest payments and dividend obligations.
Tougher regulations and weak trading in fixed income, which generates most of the investment bank's profits, are putting ever greater pressure on returns.
The bank was forced to improve its leverage ratio last year, which also influences the future size of the investment bank.
Revenues in fixed income, especially interest rate trading, have remained weak this year, extending a slump seen since May, blamed on tougher regulation and a move by the U.S. central bank to put the brakes on its bond-buying programme.
Deutsche Bank on Thursday said it had had a "slow" start to the year, following similar warnings from Citigroup and JPMorgan.
Revenues at Barclays' investment bank in the first quarter are expected to fall 16 percent from a strong year-ago period, dragged down by a 30 percent tumble in fixed-income revenues, Investec analyst Ian Gordon estimates.
Revenues from its equities and advisory businesses are expected to rise, so Jenkins could opt to shrink fixed income operations and allocate capital to equities or advisory units, or into other areas of commercial banking.
Analysts said cost cuts are likely to be needed to drive improvement in profitability at the investment bank, after compensation rose to 43.2 percent of income last year from 39.6 percent in 2012, and above Jenkins' target of mid-30s.
The row over pay has put Barclays on a collision course with investors, some of whom are threatening to vote against the bank's remuneration plan at its annual shareholder meeting next month. Jenkins is meeting investors to explain the reasoning and his long-term vision for the investment bank.
Barclays' head of equities for Asia Pacific Nick Wright is leaving the bank, sources said on Friday, adding he was leaving the industry.