I'm not sure how profits relative to expectations are relevant here. Bank profits are not rising; the banks have done better than analysts were expecting them to. This improvement in expectations may well be because bank credit losses were lower than expected. I would have to look into it.
There isn't any question that the costs for lenders to raise funds to lend has gone up relative to before. I would hesitate to say that we have returned to what will be normal conditions, but I think it's broadly agreed that the new normal will not be as advantageous as the old normal. The days of a household's being able to borrow well below the prime rate may not be coming back. That may have been the exception, rather than the norm.