Discover CEO Michael Rhodes Resigns to Become Ally’s Head

Paige Smith, Bloomberg News

A Discover credit card arranged in Germantown, New York, US, on Tuesday, Feb. 20, 2024. Capital One Financial Corp. agreed to buy Discover Financial Services in a $35 billion all-stock deal to create the largest US credit card company by loan volume, giving the combined entity a stronger foothold to compete with Wall Streets behemoths. Photographer: Angus Mordant/Bloomberg , Bloomberg

(Bloomberg) -- Discover Financial Services Chief Executive Officer Michael Rhodes is leaving the credit-card company to become CEO of auto lender Ally Financial Inc.

Rhodes will stay at Discover until April 1, when he will be replaced by board member J. Michael Shepherd as interim CEO, the Riverwoods, Illinois-based company said in a regulatory filing Wednesday. Ally has been without a permanent CEO since Jeffrey Brown stepped down earlier this year, and Doug Timmerman has been serving in the role on an interim basis.

“I have long admired Ally’s transformational approach to digital banking and its leading position in automotive finance,” Rhodes, who is set to join Ally on April 29, said in a statement. “I am so pleased the board has put its trust in me to continue advancing Ally’s strategy alongside the strong leadership team.”

Rhodes, a former Toronto-Dominion Bank executive, was named CEO of Discover in December after Roger Hochschild resigned amid compliance and risk-management lapses.

That appointment came just months before Capital One Financial Corp. agreed to buy Discover in a $35 billion deal. The deal is slated to create the largest US credit-card company by loan volume, and Capital One leadership has already acknowledged that the cost and time associated with fixing Discover’s regulatory challenges could be at the high end of expectations or beyond.

“Mr. Rhodes, who was not expected to have a long-term role at the combined company after completion of the company’s merger with Capital One Financial Corp., informed the board that he has accepted a job offer at another financial institution,” Discover said in its filing.

Prior to his role at Discover, Rhodes was Toronto-Dominion’s group head for Canadian personal banking, and has more than 25 years of experience in the industry, Ally said in its statement.

Shepherd, the new interim CEO of Discover, is a former chairman and CEO of Bank of the West, which was acquired by Bank of Montreal early last year. Shepherd will receive a base salary of $1.25 million and a one-time restricted-stock award valued at $5.75 million that will vest either when the Capital One deal is completed or one year after the award is granted, whichever comes first.

(Updated with additional details on Discover leadership beginning in fifth paragraph.)