Royal Bank of Scotland Group is facing the potential loss of several hundred million pounds after it had to take back a portfolio of £1.8bn in German properties from a fund run by Morgan Stanley.

RBS lent about €1.9bn to buy the 28 properties in 2007, and the Morgan Stanley-managed real estate fund has returned the keys. The value of the properties may have dropped significantly since the acquisition, and the bank is expected to hold on to the properties until they have regained some of their value, the newspaper said.