* Q1 profits fall 5 pct from year ago
* Fixed income revenues crash 41 pct, steeper drop than rivals
* Barclays blames fall partly on strategy changes in investment bank
* Operating costs improve, lowest for 5 years
* Shares fall 3 pct (Adds comments from finance director, analyst, details)
By Steve Slater and Matt Scuffham
LONDON, May 6 (Reuters) - Barclays said a collapse in investment bank revenue hit first quarter profits and was still hurting income in April as the British bank works on an overhaul of the flagging business, expected to be announced later this week.
Income from its investment bank fell 28 percent, largely because of a 41 percent drop in fixed income, currencies and commodities (FICC). FICC 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 far weaker than its rivals - which on average have seen a 12 percent profit fall - because of its heavy reliance on FICC and particularly rates trading, hit by low interest rates.
Barclays said it would give details of its strategic overhaul on Thursday, adding that the first steps to realign its business had also affected first quarter income.
Barclays shares dropped 3.7 percent by 0840 GMT, reflecting investors' concerns that the bank has a lot to do, and that its reorganisation looks tardy compared to rivals such as UBS which has already overhauled its business to focus on its private bank to bolster earnings.
The Swiss bank 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 strategy but market factors as well," said Chirantan Barua, analyst at Sanford.
Barclays Chief Executive Antony Jenkins wants to pull back from activities that use a lot of capital - which is expected to include European FICC and emerging markets units - to boost returns in the face of the tougher regulations and still sluggish markets.
Barclays has also decided to quit commodities trading, although finance director Tushar Morzaria declined to specify any other changes ahead of the review details.
The weak results add to ongoing concern at the bank that Jenkins faces a tough task in both taking a harder line on costs and preventing an exodus of U.S. staff. The bank raised 2013 bonuses despite a fall in profits in order to hold on to U.S. investment bank staff, prompting a backlash from shareholders.
LOWEST COSTS SINCE 2009
The investment bank's weakness offset higher income in other parts of the bank and dragged adjusted profit before tax in the three months to the end of March down 5 percent from a year ago to 1.69 billion pounds ($2.85 billion).
Barclays said it had cut its costs, which had been a concern among investors.
Operating expenses, excluding its restructuring costs, fell 12 percent from a year ago to 4.2 billion pounds, which it said was the lowest quarterly costs for five years.
Profits rose in UK retail banking, credit card arm Barclaycard and corporate banking.
Barclays did not set aside any extra money to compensate customers for mis-sold loan insurance, but said 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)