Feb. 25 (Bloomberg) -- Kardan NV, the Dutch-Israeli investor in real estate, banks and insurance, has suspended projects in eastern Europe and is closing branches at its financial-services division as the region’s economic crisis deepens.

Kardan has halted property developments in countries including Hungary and Poland, and won’t take on new projects or buy additional land in eastern Europe, Chairman Alain Ickovics said in an interview. The company is also shutting “less efficient” bank and financial-services branches and reducing its workforce, he said.

An economic slowdown triggered by tighter credit from western banks has weakened demand for the 140 residential, office and retail projects Kardan has built or is constructing. The Amsterdam-based company also operates two banks, in Ukraine and Russia, and offers consumer loans, leasing, mortgage, pension, insurance and asset management services from Slovakia to Turkey.

“I don’t want to say that we are continuing as usual,” Ickovics said at Kardan’s offices in Tel Aviv. “I can’t say that everything is rosy. Wherever we feel that the market is weak, we are not going ahead if we don’t have to.”

The number of property projects suspended didn’t exceed 10, the executive said.

Russia, Ukraine

While Kardan’s Russian bank is still issuing new loans, the unit in Ukraine has stopped lending in the country, Ickovics said. Ukraine turned to the International Monetary Fund for a $16.4 billion loan in November.

Kardan had 643 million euros in cash ($821 million) as of Sept. 30, enough to repay 519 million euros in bonds and loans due in the next two years, the chairman said.

The shares rose 0.3 shekel, or 3.3 percent, to 9.26 shekels at the close of trading in Tel Aviv. They dropped 3.6 percent to 1.66 euros on the Amsterdam exchange. Until today, Kardan had gained 11 percent this year in Amsterdam, compared with a 17 percent slump in the MSCI Netherlands Small-Cap Index.

Eastern European economies may face a region-wide crisis as the global economic slump reduces demand for their exports and western banks that have been stung by credit losses cut off lending, Standard & Poor’s said yesterday. Writedowns by banks since the start of the crisis totaled more than $1 trillion.

The region will slide into a recession this year as demand for its exports collapses, the International Monetary Fund said last month. The bloc’s economy will shrink 0.4 percent, the IMF predicted last month. IMF also bailed out Latvia, Hungary, Serbia and Belarus to avert defaults.

Vietnam, India

“Russia is a safer environment than Ukraine,” Ickovics said. While the Russian bank will certainly survive, the future of the group’s Ukraine bank depends on macroeconomic developments, he said.

“The big wild card is just how severe the overall Ukranian economy will be hit,” he said.

Halted real-estate projects are mainly in “secondary” eastern European cities, Ickovics said. Kardan’s real-estate unit also operates in China, where the economy is forecast to expand by 6.7 percent, the slowest pace in 20 years, according to the IMF. In China, Kardan has eight commercial and residential projects with local partners in cities such as Shenyang and Xian, including 22,000 apartments under construction.

“There is a slowdown in China too,” Ickovics said. “Sales are not going as fast as they used to.” Kardan won’t suspend projects in China, he said.

While Kardan doesn’t plan to make new investments now, India is an “interesting market” for the company’s real-estate unit, Ickovics said. The company may eventually expand its financial services into Asian countries including India and Vietnam while keeping its focus in eastern Europe, he said.

“We believe there will be opportunities, and we are looking for these because prices will go down,” he said.

To contact the reporter on this story: Tal Barak Harif in Tel Aviv at tbarak@bloomberg.netAlisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

Last Updated: February 25, 2009 16:46 EST