Paragon reports 10 percent rise in first-half profit

* Underlying pretax profit 63.9 mln stg vs 57.9 mln

* Paragon Bank on track to break even in 2016 (Adds details)

LONDON, May 19 (Reuters) - British buy-to-let mortgage lender Paragon (Xetra: 555869 - news) reported a 10 percent increase in first-half profit and said its recently launched bank was on track to break even next year.

Paragon made a profit before one-off items of 63.9 million pounds ($100 million) in the six months to the end of March, up from 57.9 million the year before.

The company launched a bank last year to enable it to diversify beyond the mortgage market by offering savings products and loans. It is hoping to pick up customers from Britain's biggest retail banks.

"The substantial increase in capacity and access to new and deeper funding markets, particularly through Paragon Bank, provides the platform to support further sustainable growth and diversification going forward," said CEO Nigel Terrington.

Paragon's buy-to-let lending pipeline more than doubled to 701 million, compared with a year ago.

The company is paying an interim dividend of 3.6 pence per share, up 20 percent. Its return on equity, a key measure of profitability, improved to 10.8 percent from 10.5 percent a year ago.

($1 = 0.6387 pounds) (Reporting by Matt Scuffham, editing by Sinead Cruise)