Hedge fund manager John Paulson is considering merging troubled U.S. finance company CIT Group with failed mortgage lender IndyMac Federal Bank , the New York Post said, citing people familiar with the matter.

According to the paper, the merger, a plan floated by a number of CIT's creditors including Paulson, is not part of any formal discussions between CIT and IndyMac.

The New York Post also said the plan of merger was one of several being discussed.

Paulson was part of the consortium that purchased IndyMac from the Federal Deposit Insurance Corp earlier in the year.

A merger between the two banks would diversify IndyMac's portfolio from mortgages to commercial loans, since the CIT Group is one of the largest lenders to small and mid-sized businesses in the U.S, the paper added.

Representatives of CIT Group and John Paulson could not immediately be reached for comment outside regular U.S. business hours.

(Reporting by Biswarup Gooptu in Bangalore, editing by Will Waterman)

Investment Citigroup