* Q1 adjusted pretax down 5 pct at 1.69 bln stg vs year ago
* Fixed-income revenue down 41 pct, steeper drop than rivals
* Barclays blames fall partly on strategy changes
* Operating costs lowest for five years
* Shares fall 4 pct, backtrack from two-month high (Adds comments on staff departures, link to graphic)
By Steve Slater and Matt Scuffham
LONDON, May 6 (Reuters) - Barclays Plc said a collapse in investment bank revenue had hit first-quarter profit and was still hurting income in April, throwing a spotlight on an overhaul of the flagging business due to be unveiled in two days by the British bank.
Income from its investment bank fell 28 percent, largely because of a 41 percent drop in fixed income, currencies and commodities, a trend which is hurting most banks since regulators have forced them to set aside large amounts of money to cover losses from risky trading.
But Barclays' performance was weaker than many rivals, partly because it has started shrinking the business - a process set to be extended in a strategic revamp due out on Thursday.
Barclays is expected to cut the investment bank's size to slash costs and improve profitability, potentially costing thousands of jobs as Chief Executive Antony Jenkins leads a reshaping of the business, built up by executive including Bob Diamond before his ousting from the chief executive post in 2012.
Jenkins wants to pull back from risky activities that use a lot of capital, expected to include the European fixed income arm, plus emerging markets, to boost returns in the face of tougher regulations and still sluggish markets.
Some analysts said the first-quarter results showed Jenkins faces a tough task in taking a hard line on costs, while also preventing an exodus of U.S. staff and a fall in revenue. The bank raised 2013 bonuses despite a fall in profits, prompting a backlash from shareholders.
Barclays shares backtracked from last week's two-month high to be down 4.4 percent by 1100 GMT, reflecting investors' concerns that the bank has a lot to do and that its reorganisation looks tardy compared with rivals such as UBS AG , which has already overhauled its business to focus on its private bank and bolster earnings.
Swiss-based UBS said on Tuesday it would further revamp its corporate structure to ensure it can be broken up more easily in a crisis, cutting the amount of money it must set aside for potential losses and allowing it to pay shareholders a special dividend.
"There are significant uncertainties not only with the final version of the (Barclays) strategy but market factors as well," said Chirantan Barua, analyst at brokerage Bernstein.
Barclays is quitting commodities trading, although Finance Director Tushar Morzaria declined to specify any other changes ahead of the review details.
The first-quarter slump - which the bank said continued in April - compares with an average 12 percent revenue fall at its major rivals, partly because Barclays had a strong first quarter a year ago and is more reliant on trading products such as government bonds - a business which has been hit by low interest rates.
But there are concerns it is also losing key U.S. staff, after the bank warned it lost senior bankers last year and has seen several senior people quit this month, including the head of the U.S. business Skip McGee.
"We are obviously going through a number of changes as part of our strategic review, and that may or may not have prompted some people to move on," Morzaria told reporters on a call.
The investment bank's weakness offset higher income in other parts of the bank and dragged down adjusted profit before tax in the three months to the end of March by 5 percent from a year ago to 1.69 billion pounds ($2.9 billion).
Barclays said it had cut its costs, which had been a concern among investors. Operating expenses, excluding restructuring costs, fell 12 percent from a year ago to 4.2 billion pounds, which it said was the lowest quarterly total for five years.
Costs fell 14 percent in the investment bank and compensation fell by a fifth, but pay represented 46 percent of revenue against 41 percent a year ago, due to the income drop.
Profits rose in UK retail banking, credit card arm Barclaycard and corporate banking.
The investment bank's profits almost halved to 668 million pounds - making it still the bank's biggest profit contributor, but due to the amount of capital required under new regulations, its return on equity was just 4.7 percent, compared with 18.6 percent for Barclaycard.
Barclays did not set aside any extra money to compensate customers for mis-sold loan insurance - a major issue across the British banking sector - but said it had seen a significant spike in complaints in March from claims management companies, mostly related to insurance sold more than a decade ago. (Editing by Sophie Walker and David Holmes)