UPDATE 3-Barclays talks tough on targets as weak quarter saps shares

* Income fell 14 pct in markets unit

* Q3 profit before tax 1.1 bln stg vs 1.43 bln estimates

* Bank sets new timetable for profit targets

* Share price set for biggest fall since Brexit (Updates to add graphic)

LONDON, Oct 26 (Reuters) - Barclays set a bold new timetable for achieving profitability targets on Thursday, despite a weak third-quarter performance in investment banking where Chief Executive Jes Staley is focusing on growth.

Staley has championed investment banking amid calls from some analysts and investors to ditch a business which has in recent years struggled to match the profitability of Barclays' more mundane retail and credit card units.

Barclays said profit before tax for the third quarter was 1.1 billion pounds ($1.46 billion), below a 1.43 billion pounds average of analysts' estimates compiled by the British bank.

Shares in the bank fell 7 percent to 183 pence at 0815 GMT, making it the biggest faller in the FTSE index. It was the biggest fall in the lender's share price since its more than 30 percent plunge in the days after the June 2016 Brexit vote.

The shares had already lost almost 14 percent of their value since Barclays reported full-year results in February.

"Whilst we have been a seller this year, we had thought Barclays would struggle to disappoint (on) low Q3 expectations. It looks like they have succeeded," brokerage KBW said of the results.

Nevertheless, Staley signalled his confidence in the bank's ability to increase returns by putting a timeframe on its targets. Barclays said it aims to achieve an overall return on equity above 9 percent in 2019, and above 10 percent by 2020.

Barclays' return on equity, excluding costs from the disposal of its Africa unit, is 7.1 percent although its two main divisions of UK and International achieved 9.4 percent and 10 percent respectively.

Barclays' return targets are above the 8 percent return on equity predicted for 2019 by analysts at Jefferies, suggesting the bank's new deadline is an ambitious one.

"The cost line looks to be broadly in line with consensus, therefore for them to be looking at a higher return you would assume they are either more optimistic on revenue or impairments or both," Gary Greenwood, banks analyst at Shore Capital Markets, told Reuters after the results.

The decision to set out a deadline for meeting the target is significant when Barclays rival HSBC last August abandoned its own timetable for reaching its targeted return on equity of above 10 percent by the end of this year.

Barclays, which also set out a new target cost to income ratio of 60 percent or less by 2019, said it had cut compensation in its investment banking unit by 25 percent.

The bank's markets income fell 14 percent to 3.5 billion pounds in the first nine months of the year compared to the same period in 2016.

That included a 27 percent drop in macro income - fixed income, currencies and commodities (FICC)- to 1.3 billion pounds, mirroring a weak quarter for Barclays' U.S. rivals.

Investment banks globally have struggled in recent years to make returns in excess of their cost of capital, as tighter regulations, pressure on fees from automation and low global interest rates combined to squeeze profits.

"The third quarter was clearly a difficult one for our markets business within Barclays International. A lack of volume and volatility in FICC hit markets' revenues hard across the industry, and we were no exception to this trend," Staley said.

Equities income fell 8 percent to 1.3 billion pounds, while credit was up 3 percent at 954 million pounds.

Barclays also said it had reached a settlement with the U.S. Federal Energy Regulatory Commission (FERC) for $105 million, avoiding a proposed fine of $435 million for alleged manipulation of the power market between 2006 and 2008. ($1 = 0.7538 pounds)

(Reporting by Lawrence White and Emma Rumney, additional reporting by John Geddie; Editing by Rachel Armstrong and Alexander Smith)