Bank of America Corp is expected to report a 9 percent drop in its first quarter profit, as U.S. consumer lending contracts and the costs for collecting on mortgages continue to rise.

Analysts estimate the largest U.S. bank will report net income of $2.9 billion, or 27 cents per share, down from $3.2 billion, or 28 cents per share, in the first quarter of 2010, according to Thomson Reuters I/B/E/S.

Bank of America's results come two days after rival JPMorgan Chase & Co -- the second largest U.S. bank by assets -- reported weaker consumer lending and more than $1 billion in added costs for servicing mortgages due, in part, to a settlement with bank regulators over problems in the industry's foreclosure practices.

Those same factors could hit Bank of America, analysts said.

The company is profitable, but revenue growth is constrained and the costs in the mortgage business just keep increasing, said Jefferson Harralson, bank analyst at Keefe, Bruyette & Woods Inc. They've had this general trend of lagging their peers coming out of this recession.

Bank of America's results are closely tied to the health of U.S. consumers, which is still weak nearly three years after the financial crisis peaked.

The Charlotte, North Carolina-based bank does business with one out of every two U.S. households, whose myriad of consumer lending businesses are either the largest, or among the largest in the country. But with high U.S. unemployment and consumers' cutting back on their debt loads it has left the bank with little room to grow its domestic lending business.

Loan growth is necessary for a long-term increase in net interest income, but analysts said they do not expect the bank to show an increase in the first quarter.

They're still waiting around for the recovery of the consumer, Harralson said. I don't think anybody's going to show loan growth at this point.

Outside its consumer lending businesses, more normal growth for the bank may remain elusive for two more years, the bank's management has said.

BofA's wealth management business -- run by Sallie Krawcheck -- has been highlighted as one of the bank's key areas for domestic growth since it bought Merrill Lynch in 2009. The division, which runs the second largest U.S. brokerage with roughly 15,000 advisers, earned $1.3 billion in 2010 net income.

But during the company's fourth quarter earnings call, Chief Executive Brian Moynihan expressed disappointment over the division's ability to add advisers in 2010.

And during the first quarter, Lyle LaMothe, BofA's U.S. brokerage chief, announced plans to retire in May.

Other businesses, like its mortgage unit, will not fully recover until 2014 or later, the company said recently.

In the first quarter, the bank announced plans to split off $1 trillion in bad mortgage assets from its home loans unit into a new division, called Legacy Asset Servicing, run by former OneWest Bank CEO Terry Laughlin.

The move was made, in part, to allow Barbara Desoer, the company's home loans chief, to focus BofA's mortgage business on making new loans, rather than dealing with delinquencies and foreclosures.

BofA's home loans and insurance business has reported three years of quarterly losses, and most recently lost $4.9 billion in the fourth quarter of 2010, due to charges related to a settlement with Fannie Mae and Freddie Mac over mortgage repurchases.

Its the biggest piece of the business' losses right now, and those costs are still rising, said Harralson.

(Reporting by Joe Rauch, editing by Bernard Orr)