Discover Financial Services (NYSE:DFS) shares fell more than 5% premarket following the company’s announcement that Roger Hochschild will step down as CEO, president, and a member of the Board, effective immediately.
To ensure a smooth transition, Hochschild will serve in an advisory role at the company until the year's end. John Owen, a member of the Board, has been appointed Interim CEO and president. These changes are effective immediately.
To identify a permanent successor for the positions of CEO and president, the Board has engaged a leading global executive search firm to commence a process.
Evercore ISI analysts added the DFS stock to Evercore's Tactical Underperform List.
"We expect persistent regulatory risk, management uncertainty, and potential negative implications for returns to drive near term underperformance vs peers. In our view, risk of further regulatory actions persist – and combined with management uncertainty, are likely to remain overhangs on the shares," they said in a note.
"We also see mounting risk of expense pressures as management addresses regulatory & risk concerns, particularly after acknowledging on the 2Q call that DFS had been under-invested in such areas."
BofA analysts reiterated a Neutral rating and a $116 price target on DFS.
"Business fundamentals are relatively solid – July operating metrics detailed decent loan growth and credit losses improving sequentially. However, today’s announcement and the lack of clarity on a permanent successor will only contribute to investor uncertainty around buyback timing and compliance issues at Discover," the analysts wrote in a note.
(Additional reporting by Senad Karaahmetovic)