Shares of Advanta Corp. rose Friday on a report that National Australia Bank Ltd. had made a bid for the much-shopped credit card company.

Sources said the bank offered $42 per share but was turned down. Advanta's stock closed up $1.125, to $34.625 on heavy volume.

National Australia broke into the U.S. market a year ago when it purchased Michigan National Corp. for $1.5 billion. The bank has been one of many rumored to be interested in Advanta, which has been for sale since hiring BT Wolfensohn as an adviser in March.

"It's getting near the end of the process," an investment banker familiar with the situation said Friday. NationsBank Corp. is also interested, the investment banker said.

Michael Auriemma, president of Auriemma Consulting Group, said the issue should be resolved in days but the resolution may not be announced for several weeks. Mr. Auriemma has worked with Advanta in the past.

In other news, shares of government-sponsored enterprises endured a bad day as fears of lower-than-expected earnings growth in the future at Fannie Mae dragged down the stocks of Freddie Mac and Sallie Mae.

Fannie Mae and Freddie Mac were both downgraded to "neutral" from "outperform" by analysts at two firms, Lehman Brothers and Morgan Stanley, Dean Witter, Discover & Co., while Fannie Mae was downgraded to "accumulate" from "buy" by Deutsche Morgan Grenfell Inc.

"Fannie Mae's earnings were in line with estimates, but they've been unable to find as many attractively priced mortgages as they'd like," said Smith Barney Inc. analyst Thomas O'Donnell. That led some analysts to cut their 1998 earnings forecasts for the agency. Freddie Mac's stock fell in sympathy with Fannie Mae, Mr. O'Donnell said.

Both stocks took an additional hit after a spokesman for the U.S. Department for Housing and Urban Development was quoted in Friday's Wall Street Journal as saying that the Clinton administration was looking into investment practices of the mortgage financiers. Recent revelations that Freddie Mac invested in bonds of Philip Morris Co., the tobacco company, unleased a flurry of bad publicity.

The prospect of slowing mortgage growth at a time when the government may force the agencies to invest more in low-yielding mortgages unleashed a flurry of selling in the investor-owned companies.

Trading activity in Fannie Mae was halted on the New York Stock Exchange as traders struggled to align buy and sell orders. By the late afternoon trading volume at Fannie Mae was more than double the year's average.

Fannie Mae fell $1.93, to $42.625; Freddie Mac fell $1.375, to $32.31.

Even Sallie Mae, whose focus is student loans, got pulled down $1, to $133.44, despite unveiling second-quarter core earnings of $2.10 per share, 15 cents higher than consensus estimates.

Meanwhile, bank stocks were lifted by news that the producer price index dropped 0.1% in June, a record sixth consecutive decline, signaling nonexistent inflation.

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