UK's Paragon expects buy-to-let lending to double in 2nd half

* H1 underlying pretax profit rises 21 pct at 57.9 mln stg

* Buy-to-let loans more than doubles to 269.3 mln stg

* Interim dividend up 25 pct at 3 pence/shr (Adds comments from CEO, analyst; updates share movement)

By Aastha Agnihotri

May 20 (Reuters) - Buy-to-let mortgage lender Paragon Group of Companies reported a 21 percent rise in first-half underlying pretax profit, and its CEO said lending could more than double in the second half compared with the first.

Shares in the company rose as much as 6.6 percent in morning trading on Tuesday, making them one of the top percentage gainers on the London Stock Exchange (Other OTC: LDNXF - news) .

Paragon (Xetra: PGN.DE - news) has been thriving as UK landlords and investors take advantage of a booming rental market and low interest rates, while first-time home buyers struggle to get a foot in the door.

"We have a pipeline of 348 million pounds (of buy-to-let loans) ... so if you look at the year as a whole, we would expect to be doing in the order of 600 million pounds ($1 billion)," Chief Executive Nigel Terrington told Reuters.

Paragon lent 269.3 million pounds in the six months ended March 31, up from 102.3 million in the first half of 2013.

The group manages about 10 billion pounds of loans.

The FTSE-250 company's underlying first-half pretax profit rose to 57.9 million pounds, from 47.9 million a year earlier.

"Buy-to-let lending is growing very nicely in the UK ... and we think the company will continue to perform very well," Panmure Gordon analyst Keith Baird told Reuters. Baird raised his price target on the stock to 500 pence from 390.

Paragon launched a bank in February, taking advantage of new rules that allow start-up banks to have less capital than established ones.

"The important thing about the bank is that it provides diversification of lending," Terrington said.

Paragon Bank will use deposits to extend personal and car loans.

"In due course we will do SME (small and medium enterprise) lending as well, so this is a new source of income to us in the coming years," Terrington said.

Paragon raised its interim dividend to 3 pence per share from 2.4 pence.

Shares in the Solihull-based company were up 6.5 percent at 369.55 pence at 1020 GMT. ($1 = 0.5943 British Pounds) (Reporting by Aastha Agnihotri in Bangalore; Editing by Gopakumar Warrier and Ted Kerr)