The Bank of Queensland is vying to take on the big four after confirming that it will buy ME Bank for $1.3 billion.

BoQ has been in a trading halt since last week when it started raising funds for the speculated deal.

On Monday the bank confirmed the 100 per cent purchase of ME Bank and said it would fund this via a $1.35 billion equity raising.

ME was founded 27 years ago by a group of Australian super funds and pitches itself as an alternative to the traditional banks for everyday Australians.

Its biggest sources of revenue is home loans, which it relies largely on mortgage brokers to facilitate.

The all-cash offer price of $1.3 billion represents 1.15 times ME's net tangible assets.

Deal will boost BoQ assets to $88b

BoQ said the 100 per cent acquisition would create a "compelling alternative to the big banks".

Chief executive George Frazis said the deal would double the bank's retail footprint and increase retail earnings from 36 per cent to 50 per cent.

"The increase in customer numbers means BoQ Group can now provide a genuine banking alternative to approximately 1.45 million people," he said.

"Combined, the group will have pro forma total assets over $88 billion, with total deposits of more than $56 billion."

Mr Frazis told a media conference on Monday morning that the deal was an "absolute gamechanger".

But he did not go into specifics about how the bank plans to use its new size to take on the big four on price competitiveness.

He said the bank had done "a very detailed due diligence process" to assess ME Bank after it was last year criticised for issues with its customers' redraw and offset accounts.

ME Bank informed its customers of the deal this morning.

"Day to day, you won't notice a change," it said.

"We will still be operating as ME Bank, we'll still look and sound like ME with the same great Australian-based customer service team, and we'll still offer the same simple, straightforward products and services."

In a statement, its chairman James Evans said the deal would keep ME Bank competitive.

"The benefits of greater scale will enable ME Bank to compete more effectively in the increasingly competitive banking market in Australia," the statement read.

"It will give ME Bank access to additional capital, funding, and expertise to support and invest in the delivery of improved products and services for ME Bank's customers."

The deal is expected to be finalised by August.