The embattled consumer lender Discover Financial Services has added a former top Federal Deposit Insurance Corp. official to its board of directors as it seeks to bolster its standing with the agency.
Kathy "Moe" Lonowski, the FDIC's former San Francisco region director, joined Discover's board and will serve on its risk oversight committee, the Illinois company said Tuesday.
The addition comes as Discover, whose CEO
Discover's stock has fallen more than 30% since the company disclosed in July that it was facing an FDIC action — and separately admitted it had
In a press release, Discover Chairman Tom Maheras said that Lonowski's "knowledge and depth of experience gained during her tenure with the FDIC make her an excellent addition to our board."
"With compliance being a top priority at Discover, Kathy's expertise with regulatory issues and understanding of the financial services industry will help make the company more effective in managing risk," Maheras said.
Lonowski has 38 years of experience as a bank regulator, having worked as a supervisor before being elevated to an FDIC deputy regional director role. She became the director of the FDIC's San Francisco region in 2016, where she oversaw 350 banks and played a role in discussions over whether the agency should apply penalties to specific banks, Discover said. Lonowski recently retired from that post.
The addition of Lonowski increases the board's membership to 13, Discover said in a securities filing.
Though Discover's stock price fell sharply earlier this summer, it has moved little since CEO Roger Hochschild's surprise exit on Aug. 14.
John Owen, a board member and former top executive at Regions Financial, took over as interim CEO. Discover officials have said that the company's board is working with a search firm — and moving swiftly — to find a permanent chief executive.
Discover's compliance costs have been creeping up as the company works to address the shortcomings that regulators have flagged. Chief Financial Officer John Greene said last month that Discover was "paying the price right now" for having historically underinvested in compliance and risk management.
Though Discover's stock price has been hammered, some analysts continue to see significant opportunities ahead.
In normal times, the $138 billion-asset company offers high returns on equity, Wolfe Research analyst Bill Carcache wrote in an Aug. 24 note to clients upgrading Discover to "outperform."
The company's recent underperformance was "fueled by internal control and risk management deficiencies that will ultimately be remediated," Carcache wrote, arguing that the sell-off has created a buying opportunity for investors.
But investors are split on what's ahead, Carcache wrote in a follow-up note. Some of them fear that Discover could become
Other investors think it is "unlikely" that Discover "behaved nefariously since it was simply not part of the culture," or they believe that regulators would have taken quicker action if Discover's shortcomings were dire, Carcache wrote.
