Analysts have given a cautious thumbs-up to Advanta Corp.'s new strategy, saying it will help the company through the current liquidity crisis in the home equity sector.

Advanta of Spring House, Pa., said in late October that it was dramatically reducing its use of gain on sale accounting. The controversial method requires lenders who securitize loans to estimate how they will perform, and it has caused writedowns at many home equity companies where expectations were not met. Investors have fled the sector, and stock prices have plummeted.

Last week, Advanta met with analysts and investors to discuss the new strategy, which requires using deposits from two banks it owns to fund lending and readjusting securitization levels.

"We are continuing to build an enduring, successful enterprise," said Dennis Alter, Advanta's chief executive, in a prepared statement about last week's meeting.

Advanta also said it will increase its managed receivables by 20% to 30% and improve its return on managed assets.

Advanta's move is a "reasonable approach," said Mark Giralomo, an analyst at Deutsche Bank Securities. Ultimately, Advanta should be viewed as "a little better" than other finance companies because of its strategy.

The company offers certificates of deposit, among other products, through its banks in Utah and Delaware, and it plans to increase its marketing efforts to attract deposits, a company spokeswoman said.

Advanta is also "really lucky" because it still has about $500 million of cash on hand from the sale of its credit card portfolio to Fleet Financial Group last year, said E. Reilly Tierney, an analyst at Fox, Pitt Kelton, New York. "It could be one of the survivors."

Under its new accounting method, Advanta has said, it expects to report about $4 million of fourth-quarter net income, compared with $15 million in the third quarter.

Changing accounting methods has not been a guarantee of success for specialty finance companies.

Last December, FirstPlus Financial Group in Dallas said it was virtually eliminating its use of gain on sale accounting. It was trying to restore investor confidence in the company's earnings prospects. Since then, its stock price has fallen more than 90%, and the company said last month that it would have to sell its servicing business and lay off half its employees.

Other home equity companies have been bought by banks, shuttered operations, or downsized, and many analysts have dropped coverage of the sector.

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