As the big four banks look for new ways to grow income during a period of low credit growth, rising impairment costs and rising capital ratios, Macquarie Group has decided to throw its hat in the retail banking ring.

A news story in BusinessDay outlined that Macquarie would form a joint venture distribution deal with Mark Bouris' Yellow Brick Road Group.

The publication of the story prompted Yellow Brick Road to go into a trading halt ahead of an announcement. It is an interesting move given competition in retail banking is ferocious and the big four banks have the advantage over the rest of the banking sector in that they can access debt more cheaply than those with lower credit ratings.

The big four have a credit rating of AA, while Macquarie Bank has a rating of A from Standard & Poor's,  A2 rating from Moody's and an A rating from Fitch.

In the past couple of weeks, Australia's big four banks have reported either full-year or quarterly earnings, all showing that funding costs remain high, credit growth is slowing and impairment charges are rising.

The banks that performed the best are the ones that kept a lid on expenses. And so it was with the Commonwealth Bank today, which was able to lift profits against an increasingly challenging set of circumstances. CBA reported a 6 per cent profit, putting it on track for another record profit for the year, largely due to its ability to keep expenses under control along with impaired loans.

As the euro zone continues to grapple with some massive problems and the Chinese economy slows, the Australian economy is facing some tough headwinds, which is playing out in the Australian banking system.

It means those expecting a rate cut from the Reserve Bank next month shouldn't factor in the banks passing on the full easing.

What it means is that the era of record profits for the banks will continue but the days of super-profits are over. With the home loan market stalling and bad and doubtful debts starting to rise, profit growth will be increasingly driven by the expense line.

The challenge will be to find new sources of income growth. ANZ has bet on Asia as the road to new growth, NAB has bet on an improvement in business banking, a turnaround in the UK and a lift in its financial services operations, Westpac is hoping its resuscitation of the Bank of Melbourne brand works and Commonwealth Bank has a big exposure to wealth management.

For the regional banks, it will be interesting to see how tough competition, weaker demand in personal banking and rising costs of capital will continue to impact earnings. As for Macquarie, it will be more a question of watch this space.