Barclays PLC's investment banking arm is forecast to report a sharp dip in revenues when it unveils first-quarter figures later in April, putting further pressure on CEO Jes Staley, who has taken direct control of the division.

The former head of the investment bank, Tim Throsby, was ousted in late March, with Staley saying the changes were aimed at improving returns at the division. Thorsby's deputy, Art Mbanefo, is also leaving the bank, Financial News reported, citing an internal April 2 memo and a Barclays spokesman.

This comes at a delicate time for the bank, which is under pressure from activist investor Edward Bramson, its biggest shareholder, to drastically cut back its investment banking operations.

Tushar Morzaria, Barclays' Group Finance Director, told analysts at a recent breakfast event that growth at the investment bank was likely to be curtailed for the time being, according to specialist banking group Investec PLC.

Investec analysts said Barclays' investment banking arm is set to see a 10% year-on-year decline in revenues to £2.5 billion for the first quarter of 2019.

Analysts at Credit Suisse Group AG, too, forecast in a March 19 note that Barclays' investment bank would see revenues fall 10% year on year in the first three months of the year, although subsequent Dealogic data paints an even grimmer picture. The bank will unveil its quarterly results on May 25.

'Less bad' than peers

But Investec also said it expected Barclays' investment bank performance would be "less bad" than its peers, given that the bank has made sustained market share gains and will also benefit from sterling's weakness against the dollar in the first quarter, compared with the year-ago period.

Barclays' investment banking arm reported pretax profits of £2.59 billion in 2018, up from £2.06 billion in the previous year.

Staley said when reporting the bank's full-year results that the investment banking business had grown market share for five quarters in a row and although banking fee income fell 3% to £2.53 billion, Barclays maintained its highest rank and global fee share in four years, including a record year in advisory.

The results led key investors to publicly support Staley's strategy over Bramson's plan.

Barclays' investment banking revenues is set to plummet 20% year over year in the first quarter, according to Dealogic data cited in a March 29 Credit Suisse analyst note.

JPMorgan Chase & Co.'s investment banking revenues are set to be down more than 5%, Dealogic suggests, while UBS Group AG's revenues are set to be down almost 45%.

Indeed, UBS has said its first quarter would be "one of the worst in recent history," while JPMorgan said in February that the fall in trading revenue would be in the "high teens."

Activist investor

Bramson has been lobbying Barclays' investors for almost a year to put pressure on the board to cut back the bank's investment banking operation. He wants the bank to concentrate on its retail banking and credit card activity and thinks the investment banking operation lacks sufficient scale to compete with its big U.S. rivals.

He holds a 5.5% stake in the bank through his investment vehicle Sherborne Investors (Guernsey) B Ltd. and has said he will ask investors to vote him on to the board of the bank at its annual general meeting on May 2.

There has been controversy around the way Bramson built his stake. He used a $1.4 billion loan from Bank of America Corp. and took out "put" and "call" options that limit his losses if the shares fall below a certain level while also limiting his upside. Bramson made use of a "funded equity collar" arrangement whereby Bank of America borrowed Barclays' shares and funded Bramson's purchase of them with a loan.

This has led to criticism that Bramson's interests are not aligned with other shareholders, and has also caused consternation among other banks as Bank of America is effectively funding an activist attack on a rival.

Staley, meanwhile, is determined to protect the investment banking operation from further cuts.

When Barclays replaced Throsby, who had worked with Staley previously at JPMorgan, Staley said the bank needed "a more granular execution on the business" to improve the return on equity at the investment bank, which was "not yet where we need it to be."

Incoming Chairman Nigel Higgins, from Rothschild & Co. SCA, takes over from John McFarlane at the annual general meeting and has met the bank's biggest shareholders in recent weeks.