Cramer warns bank stocks need to be valued entirely different now, and this is why

The stock market finally turned a new leaf on Friday, and Jim Cramer says bank stocks can now be valued based on earnings.

That might seem obvious to some, but it has been a long time since actual earnings were taken into account for bank stocks.

"Bank stocks can now be valued not on net interest margins, or book values, or loan losses and Justice Department fines, but earnings … they are the cheapest stocks in the market," the " Mad Money " host said.

Investors remembered that banking is actually a good business on Friday, when they rewarded those shares with big gains after reporting, even after many of the gains were repealed by an oil-related pullback.

JPMorgan (NYSE: JPM) reported an 11 percent deposit growth and 14 percent core loan growth, yet the stock sells at just 12 times earnings.

Bank of America (NYSE: BAC) has also had strong loan and deposit growth, along with the lowest percentage of loan losses in the bank's history.

Even after scandal, Wells Fargo (NYSE: WFC) still had 6 percent deposit growth.

Under President-elect Donald Trump "...I think there will be a recognition that the banks have too much capital and they need to be allowed to dividend more of it to their shareholders or make more home loans," Cramer said.

Cramer also expects compliance expenses to peak, and automation to replace expensive people who examine the paperwork.

Ultimately, with banks now valued on earnings, the "cheapest stocks in the market" could have a big run ahead of them.

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