Hill, who set up the bank in 2010 with focus on customer service, remains as a non-executive director until 31 December and will then be appointed as emeritus chairman, an honorary title to recognise his “extraordinary contribution”, the company said in a statement.
Board member Michael Snyder will be interim chairman until a permanent replacement is found.
The bank has been under fire after a massive accounting blunder at the start of the year, which forced it into a £350mln equity raise and sparked investigations by the Financial Conduct Authority and Prudential Regulatory Authority, with investors pressuring Hill to leave.
The news of Hill's early departure pepped the shares up 1% to 195.51p by noon on Wednesday, following a 20-fold tumble since all-time highs of over 4,000p in March 2018.
Earlier this month, the bank got some investors back on side as it got a £300mln bond away with 9.5% coupon, upping the amount to £350mln after the chunky interest rate attracted wide reception.
“The company may have raised funds at the second attempt to shore up its capital position earlier this month but it will be interesting to see if Hill’s departure leads to a change of approach for the business going forward,” said analysts at AJ Bell.