Barclays Capital has ousted Grant Kvalheim, its co-president, making him the latest casualty of the bank’s foray into risky American sub-prime mortgages. It is understood that Mr Kvalheim, who joined the bank in 2001, will leave this quarter.

The announcement was made in a memo to staff yesterday. A spokeswoman for Barclays declined to provide further details.

Jerry del Missier, the co-president, will become sole president of the investment bank, while Bob Diamond will remain as its chief executive.

Mr Kvalheim is just the latest high-profile exit on Wall Street as investment banks nurse their wounds from the summer’s credit crunch. His departure follows those of the chief executives of Citigroup, Merrill Lynch and Bear Stearns.

Mr Kvalheim and Mr del Missier had been groomed as possible successors to Mr Diamond, who is also president of Barclays and chairman of Barclays Global Investors, but insiders have said the co-presidency has not worked. Mr del Missier is now the heir-apparent.

Mr Kvalheim, 51, was poached from Deutsche Bank along with John Winter and Peter Goettler, two other senior investment bankers. He was believed to be on a package worth $15 million (£7.5 million), including a guaranteed bonus. But his luck turned sour last year after Barclays Capital was forced to write down £1.7 billion in losses related to sub-prime investments made in units under his watch. They included the use of complex debt instruments, known as collateralised debt obligations (CDOs) that wrapped up parcels of sub-prime mortgage debt and sold them on to other investors.

Barclays Capital was also behind numerous structured investment vehicles (SIVs) and a riskier versions of them – SIV-lites, which were heavily invested in sub-prime mortgages.

It was also one of the biggest providers of leveraged loans to private equity firms and had been growing that business in the US where many of the big deals are now stuck in the pipeline.

In September, Barclays shifted the responsibility for credit trading to Mr del Missier. Although he still retained responsibility for investment banking many saw the move as a sign that Mr Kvalheim’s time was running out.

The former co-president is not the only Barclays executive to have felt the heat in the wake of the credit crisis. Edward Cahill, head of the bank’s European CDO group, resigned in August and John Kreitler, US head of credit trading, and Vince Balducci, US head of credit derivatives, were both stripped of their responsibilities.

Shares of Barclays closed up 1½p at 473p. They have lost about of 38 per cent of their value in the past year. Although the market was pleasantly surprised by the size of the bank’s writedowns, which pale in comparison to those of its US counterparts, investors are still concerned there could be worse to come.

Barclays’s own numbers painted a gloomy picture. Of the £1.7 billion in writedowns, £1 billion came in the third quarter but £700 million was notched up in October alone, suggesting a worsening situation.

Despite the write-offs, Barclays Capital made record profits of £1.9 billion in the first ten months of the year, Investors will look at the full-year results next month for evidence that Mr Diamond has stabilised the business further and that the worst of the credit writedowns are behind him.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive