NEW YORK (TheStreet) -- Bank stocks took a very painful dive on Friday, as U.S. stock markets followed international markets down, on concern over a slowdown among emerging economies.
Capital flight was a major concern, with the Argentine peso sliding 12% last Thursday and Friday, as the company devalued the currency to spur export growth.
Any concern over emerging markets is important to Citigroup and its investors. The company is unique among major U.S. banks, in that most of its revenue and earnings are derived from outside the country. For Citi's core unit Citicorp, 57% of fourth-quarter adjusted revenue came from outside the United States, excluding credit and debit valuation adjustments (CVA and DVA) and minority investments. On a similar basis, also excluding a credit card divestiture, 69% of Citicorp's fourth-quarter earnings came from outside the U.S.
Citigroup won't disclose its year-end exposure in Argentina until it files its annual report with the Securities and Exchange Commission, which is expected early in March. As of Sept. 30, the company said its "net investment in its Argentine operations was approximately $750 million."
The $750 million figure was the amount of equity supporting Citi's $4.2 billion in assets in Argentina at the end of the third quarter, according to an estimate by KBW analyst Fred Cannon.
The company converts the statements for its Argentina business into U.S. dollars and said that as of Sept. 30 it had "cumulative translation losses related to its investment in Argentina, net of qualifying net investment hedges, of approximately $1.19 billion (pretax)."
These carrying losses would not hit Citi's earnings and book value unless the company were to sell or shut down its operations in Argentina.
KBW analyst Fred Cannon in a note to clients on Friday wrote that Citi "has hedged this exposure for GAAP accounting through the use of foreign currency forwards ($200M notional) and the company has additional economic hedges in holdings of U.S. Dollar ($370M) and other non-Argentine currency futures (200M notional) at the local subsidiary."
"The rapid depreciation of the Argentine Peso this year brings back memories of the early 2000's economic crisis in Argentina. During the prior economic crisis, Argentina abandoned its currency peg to the U.S. Dollar and this led to a deep economic depression," Cannon added.
At this point, investors will want Citi's entire exposure in Argentina boiled down to a worst-case scenario.
"If Citi were to write off the entire net investment in its Argentine subsidiary from 3Q13 that would be $0.17 per share. If we were to give Citi credit for the foreign currency forwards, this impact falls to $0.12 per share," Cannon wrote.
So far so good, but Cannon went a bit further: "However, if we assume Citi were to experience credit and operational losses similar to 2002 ($1.11B) and had to record $275M of [foreign exchange] translation loss then we estimate that level of losses would impact book value by $0.45 (< 1% of $55.38 tangible book value at 4Q13)."
So a full exit from Argentina would be an annoyance, but its effect on the bank's capital strength would be negligible.
Investors may be looking at another rough week, depending on whether or not other countries start making big changes in monetary policy.
Citigroup's shares were down another 0.7% in morning trading Monday, to $49.22.
The following chart shows the performance of Citigroup's stock against the KBW Bank Index and the S&P 500 since the end of 2011: