Trading in fixed income, currencies and commodities (FICC) divisions fared the worst, with revenue down 16 percent to $22 billion, compared with $26.1 billion a year earlier, according to consultancy Coalition.

Regulations brought in after the financial crisis that require banks to build up capital buffers to cover their risky assets have hit interest rate trading desks hard, sending revenue 19 percent lower in the first three months of the year, while a lack of volatility led to a 26 percent decline in foreign exchange trading, Coalition said.

Investment banks are reshaping themselves to increase their profitability and a number, including Deutsche Bank and Barclays have made cuts to FICC divisions to deal with weak volumes and the new regulatory environment.

Barclays said earlier this month it would cut 19,000 jobs, with 7,000 coming from the investment bank as part of an overhaul of the business.

Across all the investment banks tracked by Coalition, which include Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS, headcount dipped 3 percent.

Commodity trading was the sole bright spot in FICC, with revenues climbing 26 percent to $1.8 billion due to higher U.S. power and gas turnover and stronger investor interest.

Revenue from banks' equity business was lower in the first quarter, dropping 3 percent year-on-year to $11.2 billion, but investment banking divisions, which advise on mergers and acquisitions (M&A) and stock market listings, produced 4 percent growth to bring in $9.7 billion.

M&A and equity capital markets revenue rose 24 percent and 8 percent, respectively, Coalition said. The financial, telecommunications and healthcare sectors were particularly strong for deal-making, Coalition added.

(Reporting by Clare Hutchison; Editing by Elaine Hardcastle)