* Q2 EPS C$1.00/shr vs est C$0.94/shr
* Raises quarterly dividend 7 pct to C$0.15/shr
* Co cautious on non-residential lending -- CEO
* Sees margin improvements for rest of the year
* Shares rise as much as 5 pct (Recasts, adds CEO comments and updates stock movement)
By Krishna Chaithanya
BANGALORE, Aug 6 (Reuters) - Canada's Home Capital Group Inc (HCG.TO) posted better-than-expected quarterly profit backed by higher loan originations and the mortgage lender raised its quarterly dividend by 7 percent.
The company, which mainly underwrites residential mortgages, said total mortgage originations rose to C$1.28 billion from C$886.9 million last year.
Net impaired loans represented 1.3 percent of the total loans portfolio as at June 30, up from 0.7 percent at the end of June 30, 2008. Impaired loans may continue to increase over the next one or two quarters, the company said.
"We think the total number (impaired loans) will be about the same, although we are working very hard to resolve them to sell the properties when we do get into possession, and we do see a lot of improvement in the trends in Ontario", Chief Executive Gerald Soloway told Reuters.
The lender, which increased its quarterly dividend by 7 percent to 15 Canadian cents a share, said net interest income was C$40.5 million, up from C$39.4 million last year.
Shares of Home Capital were trading up 3.8 percent at C$36.60 in afternoon trade on the Toronto Stock Exchange. They had earlier touched a high of C$36.98.
Non-residential mortgage originations during the quarter were C$23.3 million, down 81 percent from the same period in 2008, reflecting the lender's strategy to mitigate risk in light of current economic conditions.
"We will continue to be cautious on the non-residential lending, we have really seen quite good uptick in the residential market in Ontario, Quebec and Americas," Soloway said.
"We think that for the balance of the year it may not decrease that much, but we see a continuing decrease. It might end the year somewhere lower than the C$774 million which we are looking at now," Soloway added.
Home Capital's net income was C$34.4 million ($32.12 million), or C$1 a share, compared with $26.6 million, or 77 Canadian cents a share, a year ago.
The results beat the average analyst profit forecast of 94 Canadian cents a share, excluding items.
The company sold C$655.1 million in Canada Mortgage and Housing Corp-insured securities during the quarter, up from the C$250.6 million securitized and sold for the same period last year.
Separately, mortgage lender Equitable Group Inc ETC.TO also posted better-than-expected quarterly profit helped by lower expenses.[nBNG413095]
Equitable Group's shares were trading up 7 percent at C$19.90 in afternoon trade.
$1=1.071 Canadian dollar Additional reporting by Isheeta Sanghi, Editing by Vinu Pilakkott, Dinesh Nair