Another CEO is leaving Discover. The company says he wasn't expected to be there very long anyway.

By Bill Peters

Michael Rhodes, who is taking the CEO job at Ally Financial, was 'not expected to have a long-term role' at Discover as its tie-up with Capital One looms

Discover Financial Services Chief Executive Michael Rhodes is resigning after a brief tenure in the job to take the helm at Ally Financial, both companies said on Wednesday.

In a regulatory filing, Discover (DFS) said it had accepted Rhodes' resignation, effective next Monday. Discover, which has undergone multiple changes at the top in recent months, said Rhodes was "not expected to have a long-term role" at the company, as rival credit-card giant Capital One Financial Corp. (COF) prepares to close its acquisition of Discover later this year or in early 2025.

J. Michael Shepherd - a current director at Discover and the former chairman and chief executive of BancWest Corporation - will become Discover's interim CEO.

In August, Roger Hochschild abruptly resigned as Discover's chief executive, not long after the company disclosed that it had been overcharging merchants for years and faced deeper regulatory scrutiny. John Owen took over as interim CEO before the company subsequently appointed Rhodes as chief executive in December.

Shares of Discover were down 0.3% after hours on Wednesday. Ally Financial's stock (ALLY) was down fractionally.

Rhodes will also step down from his roles as president, board member, and a director and officer of Discover Bank. He will serve as an advisor to the interim chief executive at Discover through April 12 and start at Ally on April 29.

"I have long admired Ally's transformational approach to digital banking and its leading position in automotive finance," Rhodes said in a press release from Ally Financial. He replaces Jeffrey Brown in the top spot at Ally, after Brown departed the company at the end of January.

Analysts have said an acquisition of Discover would help Capital One build out its payments network and create a massive credit-card company. Their plans to combine, announced last month, arrive during an election year and could face political headwinds as the Biden administration tries to take a tougher stance on corporate consolidation.

"Given recent events in other industries, regulatory concerns will likely linger, but the card market is very competitive, and as a percentage of U.S. credit-card purchase volume, the combination appears reasonable," William Blair analyst Christopher Kennedy said recently.

Shares of Discover have risen 35.9% over the past 12 months.

-Bill Peters

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03-27-24 1751ET

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