Magna Group Inc., the third-largest banking company in St. Louis, is attracting attention on the heels of a successful $59.8 million common stock offering.

Anthony Polini of A.G. Edwards & Sons upgraded the stock to a buy on Monday, as trading volume surged to about 200,000 shares, or more than three times normal.

Magna was at $13.75 late Tuesday in light trading, unchanged for the day but up from Friday's offering price of $13.50.

The company, which has $3.7 billion in assets, issued 4.6 million shares through Donaldson, Lufkin & Jenrette Securities Corp. About 600,000 shares were issued to cover overallotments.-

Stronger Balance Sheet

In upgrading the stock from "hold," Mr. Polini said the offering strengthened Magna's balance sheet. Credit quality has improved since last December, when Magna acquired a troubled St. Louis bank, the analyst said.

Joseph A. Stieven of Stifel Nicolaus & Co., who has rated the stock a long-term buy all along, said the stock sale reduces Magna's debt and increases its capital.

Magna said its leverage capital ratio would rise to 7.74% from 6.17% as a result of the transaction.

The company will use $41 million of the proceeds to prepay the outstanding balance of a floating-rate term loan. It will invest the remainder in short-term obligations.

At current interest rates, the company said, prepaying the loan will result in a one-time charge against its third-quarter earnings of about 3 cents a share.

Thereafter, it would increase net income by 2 cents a share per quarter.

Operating Income Up

For the first six months, the company posted operating income of 54 cents a share, compared with 51 cents a year earlier.

Mr. Polini expects earnings to grow 20% in each of the next three years. He estimates Magna will earn $1.30 a share this year versus 28 cents a share in 1991.

Mr. Polini had been skeptical about Magna's acquisition of Landmark Bancshares because of that company's high nonperforming assets. But a 39% reduction in nonperforming assets in the combined institution has changed his thinking.

"Magna knew what it was buying," he said. "They've had a net outflow in every category of nonperformers and posted respectable earnings."

Nonperformers at 2.07%

Magna reduced nonperformers to 2.07% of total assets from 3.33% in the 1992 six-month period, Mr. Polini noted.

Despite this progress, Magna's stock has continued to trade at just over book value, compared with an average price for regional banks of 1.4 times book value, Mr. Polini said.

Mr. Stieven was only slightly less enthusiastic about Magna's prospects. "The degree of success is what we're uncertain of," he said.

Where Mr. Polini expects Magna's return on assets to increase to more than 1% next year from 0.75% in the second quarter, Mr. Stieven said it would be 1995 before that level is reached. Offering at a GlanceMagna Group's recent stock saleNumber ofshares 4.6 millionPrice pershare $13.50Netproceeds $59.8 millionMain use of $41 millionproceeds debt reductionLead Donaldson, Lufkin &manager Jenrette Securities Corp.Source:Magna Group

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