(Adds word "no" in 4th para so phrase reads "no comment")
RIO DE JANEIRO, March 9 (Reuters) - Brazil's government has given up plans to hold an initial public offering of state-run mortgage lender Caixa Economica Federal in favor of an IPO of bank's insurance unit Caixa Seguros, Valor Economico newspaper reported on Monday.
Plans to list shares of Caixa were unveiled by President Dilma Rousseff in December as the government seeks to raise funds to patch a growing budget deficit.
However, preliminary studies showed that a sale of Caixa's shares would be a lengthy process yielding little return and potentially disrupting social investment by the bank, Valor said without naming its source.
A spokeswoman at Brazil's Finance Ministry said she had no comment on the report and representatives for Rousseff's office were not immediately available to comment on Valor's story.
Valor said an IPO of Caixa Seguros would follow the same model adopted by state-run Banco do Brasil in 2013, when it listed shares of its insurance unit BB Seguridade .
Caixa is Brazil's third-largest bank by total assets and the nation's top issuer of home loans. It holds a 48.2 percent stake at Caixa Seguros, while French insurer CNP Assurances owns the remaining shares. (Reporting by Walter Brandimarte Editing by W Simon)