Impact of 9-11 on the Banking Industry

An analysis of how the banking industry was affected by September 11th.

This paper examines the impact of September 11, 2001 on the economy with particular reference to the banking industry. The paper discusses oil price risks, equipment and software investment, the construction industry, trade and fiscal policy. The paper considers the future of the banking industry and calls for additional research and analysis to understand the effects of the terrorist action on the economy.
“Even prior to the terrorist attacks, the economy was in recession. The World Trade Center [WTC] attack on September 11 further shook US financial sector and consumer confidence, which apparently pushed the local and the national economies into deeper recession. (Fiscal Policy Institute Report, 2001) The impact of the attacks was the greatest on the airline, tourism, hotel and restaurant businesses. Banking as a group suffered no direct losses except in the immediate area of action that is WTC in New York but indirect losses and induced short-term effects from other businesses are likely to be felt by the industry.
“Citigroup Inc. (NYSE:C) for example, reported core income for the third quarter ended September 30, 2001 of $3.26 billion, or $0.63 per share, down 7% compared to the same period the previous year. Results of the September terrorist attacks included $502 million, or $0.10 per share, in after-tax losses related to insurance claims, and about $200 million, or $0.04 per share as a result of the disruption to their businesses. Excluding these items, core income increased 12%. Citigroup’s Investment Activities lost $120 million in the quarter due to reduction in equity values. (BUSINESS WIRE,-Oct. 17, 2001) which were not all connected to the September attacks.”