It will deliver ANZ 1.2 million new customers from Queensland and propel it from last of the Big Four banks in home loans and household deposits to third, overtaking the National Australia Bank. It will also bolster ANZ's market position in commercial lending.
But it's actually an expensive way for ANZ to recover lost ground. And it may not work.
Investors should be asking why ANZ has to buy another bank to increase its loan books.
ANZ has lost a significant amount of market share in home loans over the past four years and it sees acquisition as the best way to recoup market share.
ANZ's current market share in home lending is about half the Commonwealth Bank of Australia's. If it buys Suncorp, the combined entity will have 15.4 per cent of the owner-occupier home lending market, and 15.4 per cent of the investment housing loan market.
This would just get it back to about the same market share as it had four years ago.
In other words, ANZ is spending close to A$5 billion to repurchase market share it has squandered over the last few years.
As other banks capitalised on the home lending boom during the COVID-19 pandemic, ANZ slid backwards.
The bank had failed to anticipate demand for home loans and was unable to approve loan applications as quickly as rivals. Eager and impatient homebuyers went to other banks instead.
The bank was manually assessing every home loan application that came through mortgage brokers, who play a major role in the Australian market. It simply couldn't compete with those banks which could digitally assess and approve applications within 24 hours.
Earlier this year ANZ launched its new technology platform ANZ Plus, implemented by 800 people at a cost of A$400 million, and said applications for standard mortgages could be turned around in about three days, with complex loans taking nine.
The bank aims to launch an online home loan in 2023.
There is a huge amount riding on ANZ's new technology and its ability to keep driving home loan approval times down, just so that it can keep up with the competition.
The question for ANZ investors is how confident they are in the technology turnaround, which is still unproven.
Even if it is effective, ANZ will have a long way to go.
Westpac says it will this year launch a mortgage that can be approved in 10 minutes.
The bank will initially roll the paperless mortgage out to borrowers who are refinancing loans, earning a wage or salary and who own at least 20 per cent equity in their property.
In other words, the least risky and easiest to assess customers.
They will roll out the fast-track paperless mortgage more widely next year.
National Australia Bank says it is already approving about a third of its home loan applications in less than an hour.
The Commonwealth Bank of Australia launched its new digital mortgage Unloan, which it says takes only 10 minutes to apply for, although the bank says it can't actually approve its mortgages this quickly.
The "time to yes" is a key battleground in home mortgages for banks. They reason that, by giving loan approval in a few minutes, their customers are less likely to go to competitors for a comparison.
Lenders are preparing to use fast turnaround times to retain and win new customers during the huge wave of loan refinancing that will hit the banking sector next year. when fixed-rate loans expire.
Almost 40 per cent of Australians with mortgages locked in ultra-low fixed rates in 2020 and 2021.
Many of these are set to expire as soon as next year.
It's a huge opportunity for banks which can win the race to yes. It is also a big risk.
ANZ has also promised a 10-minute mortgage, but tellingly hasn't said when it will be delivered to market. And nor will it be available to its core customers, only to those using its new ANZ Plus system and brand.
If ANZ doesn't get it right it will continue to lose market share in the home lending market and will have wasted a huge amount of investors' equity buying Suncorp.
The deal still needs approval from Federal Treasurer, the competition regulator and the Queensland government.
If any of them knock the deal back, they might just be doing ANZ shareholders a favour.
