Cohen & Company Q4 2024: Key Contradictions in CCM Performance, Dividends, and Growth Prospects

These are the key contradictions discussed in Cohen & Company's latest 2024Q4 earnings call, specifically including: Cohen & Company Capital Markets (CCM) performance and expectations, dividend policy, CCM growth prospects and financial performance, company performance metrics, and strategic initiatives:



Revenue Performance in Capital Markets:
- Cohen & Company Capital Markets (CCM) generated $61.6 million of new issue and advisory revenue during 2024, almost doubling the full year 2023 CCM revenue of $21.9 million.
- This growth was driven by CCM expanding into underwriting initial public offerings and advising nearly 50 clients, despite volatile revenue recognition due to limited engagements and transaction timing.

Mortgage Business Growth:
- Despite continued elevated mortgage rates and lower levels of mortgage origination, Cohen & Company grew its mortgage business in 2024, ending the year with a gestation repo book of $2.7 billion, up more than 30% from December 2023.
- The company's confidence in future earnings potential is attributed to its strategic focus on enhancing long-term sustained value for stockholders, including through continued payment of its quarterly dividend.

Net Loss and Adjusted Pretax Results:
- Cohen & Company reported a net loss of $2 million for the quarter, or $1.21 per fully diluted share, and an adjusted pretax loss of $7.7 million.
- The loss can be attributed to a decline in new issue and advisory revenue, which decreased to $10 million in the fourth quarter, compared to $22.4 million in the third quarter, and negative principal transactions revenue related to losses on investment assets received as consideration.

Principal Transactions and Equity Value Decline:
- Principal transactions and other revenue was negative $2.5 million, primarily due to mark-to-market adjustments on principal investments and increased holdings of public equity positions in post-business combination SPACs, leading to a decline in equity value.
- The decline in equity value is a result of the company's involvement in the SPAC market as an asset manager and investor, which has resulted in increased volatility in its principal portfolio and operating results.