HSBC and Bank of China (Hong Kong) will reap up to $3.2 million in interest income on loans taken out in advance of the now-suspended Ant Group IPO, after announcing they would not waive interest charges on Thursday.

The two banks facilitated roughly HK$250 billion ($32.4 million) in margin financing to retail investors ahead of the world’s largest public offering which was slated to raise up to $39 billion on the Hong Kong and Shanghai exchanges.

But in a Tuesday filing, Ant said it “may not meet listing qualifications or disclosure requirements” - despite being given the regulatory green light a week earlier. The listing delay came as a shock to retail investors and many had bet big on the listing with more than $60 million in loans taken out in Hong Kong alone.

“The puzzle here is why the regulators did not raise this issue more in the past,” Victor Shih, author of ‘Factions and Finance in China: Elite Conflict and Inflation’, told Business Times.

A number of Hong Kong stock brokers who specialise in IPO loans will issue refunds to customers who bid on the delayed IPO. “The handling fee and 90% margin interest of new shares for subscribers to Ant Technology Group will be fully refunded,” the Phillip Securities Group brokerage said in a statement.

HSBC and BOC(HK) declined to comment further on their decision not to offer full refunds, with a spokesperson for the first bank noting only that “customers are being refunded in accordance with our IPO loan terms and conditions.”

By Friday Ant is expected to return more than $167 billion from the initial bid to retail investors. Investors with unsuccessful bids for shares in the fintech group will be the first to see their money returned either as credits or via cheques by post, Ant said in a filing on the Hong Kong exchange.

Chinese Loan Brokers Collide

Ant’s online lending platform has been on a collision course with traditional banks and regulators for some time, according to analysts.

“In reality, Ant was profiting more from brokering loans than the Chinese banks who were carrying the risk of default,” Justin Tang, head of Asia research for United First Partners, told Business Times on Thursday.

“Ant was only keeping 2% of these loans on its books and in essence eating the bank's lunch and popping the bag in front of their face.”

These concerns are shared by other observers. “Because Ant is sourcing loans for traditional Chinese state banks, regulators are afraid that Ant would have incentives to source bad quality loans without risking any of its own capital,” Shih noted.

But the Alibaba offshoot won’t be able to have its cake and eat it too for much longer.

On Monday, the People’s Bank of China outlined stronger regulations for online lenders like Ant requiring, among other things, that these microlenders fund at least 30% of the loans themselves.

In addition, they will require a 5 billion yuan ($746.8 million) registered capital threshold.