The bank reporting season is drawing to a close. Royal Bank of Scotland today and HSBC next week complete the narrative. However, anyone looking for a consistent explanation of where the sector stands in the wake of the global credit crunch had better think again.

Since Bradford & Bingley kicked off the UK season on February 13, market sentiment here has been up and down like a yo-yo. In broad-brush terms, those perceived as mortgage banks have had a doing, while their more broadly-based rivals have got off more lightly.

Valuations across the whole banking sector have swirled up and down, day after day, as investors fail to decide whether the worst of the bad news on write-downs and liquidity problems is now out in the open. Or might there still be more nasties lurking in the financial undergrowth?

One thing is certain. The initial trigger for this crisis - unravelling sub-prime home loans in the US which were then repackaged into AAA-rated securities and sold on around the global financial system - hasn't gone away.

It's one thing to take an initial stab at the consequential write-downs of having some of these dodgy derivatives on or off your own balance sheet. But if the core problem continues to get worse, as American house prices continue their slide and levels of repossessions rocket, who's to say more write-downs may not eventually become necessary?

Federal Reserve chairman Ben Bernanke was telling a Congressional committee yesterday the high foreclosure rate across America is now infecting the wider economy. There is growing talk of at least another half-point off US interest rates in coming weeks. And similar dovish noises are coming from members of our own MPC.

But that doesn't quite address the central fear - that the US housing market is in meltdown and, as a result, it is much too early to say the worst is over for the holders of all those asset-backed securities, now wobbling on such treacherous foundations.

There is another major problem, well illustrated by the market's decidedly downbeat reaction to the latest HBOS results. The narrative all banks want to get across is that, once the toxic impact of the sub-prime fiasco has been washed out of the system, it will be back to business as usual.

"We are well placed to take opportunities presented by these difficult markets and deliver good growth in shareholder value over the next few years," claimed the HBOS chief executive Andy Hornby. But Hornby was speaking as Hector Sants, the boss of the UK's Financial Services Authority, was openly doubting whether "markets would ever return to the way they were".

Sants thinks the "originate and distribute" model of banking, whereby individual banks write loans, repackage them, and then sell them on, as assets, to other institutions, is now dead. The era of cheap credit, he believes, may disappear with it.

If he's right, the concept of getting back to normal begins to lose all meaning.

Overall, the HBOS results yesterday offered some comfort. Write-offs totalled just £227m, up from the indications of £180m through to the end of November, but by no means as alarming as those elsewhere. Underlying pre-tax profits were up 3% and the full-year dividend was lifted by a whopping 18%.

But HBOS owns the UK's biggest mortgage provider, Halifax. Underlying profits in its retail division slumped by 13%, as margins came under intense pressure. HBOS's corporate side is now, by some distance, the more profitable arm of the bank. And that despite the fact that margins there are also under pressure and bad debts are increasing.

If existing models of banking are redundant, as Sants argues, and the era of cheap credit is over, quite how HBOS rebuilds its retail margins is not immediately obvious. It can reprice its mortgage products to reflect the new risks.

But it is also going to have to compete for deposits with more attractive terms there too.

There are no easy answers. And that, in the end, is why the shares were marked down by nearly 7%.

HBOS is not alone of course. The whole sector may be forced to craft a fresh narrative about how, in these changing market conditions, it can keep customers and shareholders happy.

Might it be that banking will have to become accustomed to much more pedestrian times, with executive rewards to match? That's another mismatch the FSA is worrying away at. The bonus culture thrived on the kind of exotic instruments which promised quick rewards but, in the end, holed Northern Rock below the waterline.

If the aftermath of that debacle is a banking marketplace that reverts to older principles, will top bankers have to get used to less exotic remuneration packages too? We shall see.