LONDON (Reuters) - Barclays Plc, Britain's third-biggest bank, raised its 2007 write-down on the value of risky assets to £1.6 billion ($3.1 billion) but reported profits broadly in line with analysts' expectations.

Barclays is the first big UK bank to report earnings after a turbulent year and analysts said yesterday's numbers — including a lower-than-expected £300 million increase in write-downs and a 10-percent dividend rise — were good news for the sector.

Profits at Barclays Capital (BarCap), its investment bank arm, rose five percent to a record £2.34 billion, above expectations.

"Overall, the numbers came in broadly in line with our expectations and consensus, and that's a relief," said Mamoun Tazi, analyst at MF Global. "BarCap performed in line despite the write-downs, which highlights the fact the underlying business is very strong." Barclays reported a 2007 pretax profit of £7.08 billion, down from £7.14 billion in 2006 but just above an average forecast of £7.05 billion from Reuters Estimates. Underlying profits, which exclude sales of businesses, rose three percent.

The bank said it is confident it knows where its risks are and is comfortable with the current levels of write-downs, reassuring investors after Credit Suisse announced earlier yesterday a shock $2.85 billion write-down for the first quarter of 2008.

Barclays shares fell as much as 4.5 percent in early trade, but by lunchtime in London had bounced back to trade up 3.3 percent at 475.25 pence, valuing it at about £29 billion.

Its UK banking business was in line with expectations and both retail banking and Barclaycard, where profits rose 18 percent, benefited from a drop in bad-debt charges, although there was a jump in impairments on US sub-prime mortgages.

Barclays is striving to reassure investors it can grow its domestic and international retail arm and has a clear strategy after losing a bid battle to buy Dutch rival ABN AMRO last year which would have made it a top 10 global bank.

Overseas businesses contributed two-thirds of group profit, compared with just 20 percent in 2003, and the bank added 600 international branches, boosting distribution by a third.

"Our performance in 2007 gives us a lot of confidence," John Varley, chief executive, told reporters on a conference call.

"The market threw pretty much everything it could do at the capital markets businesses and you can see the results that Barclays has generated."

An immediate concern is the impact of the credit crunch. Global banks have lost over $140 billion from their exposure to risky assets, and capital markets business has slowed sharply.

Varley said BarCap had seen "good performance on the income line" in capital markets businesses in the first weeks of 2008.