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* New loans at 793.2 bln yuan in May, f'cast 720 bln yuan
* Broad money supply up 13.2 pct, f'cast +13.0 pct
* Outstanding loans up 15.7 pct, f'cast +15.5 pct
BEIJING, June 11 (Reuters) - Chinese banks made a higher-than-expected 793.2 billion yuan ($125 billion) in new loans in May and money supply growth also picked up slightly, according to central bank figures released on Monday, suggesting monetary policy easing and faster government approval of investment projects are gaining traction.
The market had expected 720 billion yuan in new loans, which were just 681.8 billion yuan in April after a lending feast of 1.01 trillion yuan in March - a 14-month high.
Those stronger lending figures - which followed a spate of weekend data releases on factory output, investment and trade - fanned hopes that the world's second-largest economy might be stabilising.
Bank lending is a centrepiece of China's monetary policy, given that it is controlled by Beijing in order to manage inflation and economic growth.
"The new loan data is largely line with expectations. The rise is due to monetary easing and, more importantly, the government's quickening approval for new investment projects," said He Yifeng, an economist at Hongyuan Securities in Beijing.
"We believe the economy has showed some signs of stabilising in May and could bottom out in the second quarter," he said, expecting new loans to reach 900 billion yuan in June.
China's broad money supply rose 13.2 percent in May from a year earlier, also stronger than market expectations of 13 percent, the central bank said on Monday in a statement on its website, www.pbc.gov.cn.
Beijing has stepped up policy easing to bolster its economy, which is currently on course to grow at the slowest pace since 1999.
Annual economic growth is already certain to dip below 8 percent in the second quarter - the sixth consecutive quarter of growth slowdown as demand at home and abroad slackens.
The central bank last week cut interest rates for the first time since the depths of the 2008/09 global financial crisis, while giving banks more freedom to set lending and deposit rates in a step toward liberalisation.
The central bank has reduced banks' reserve requirement ratio three times since last November to pump out additional funds that can be used to boost lending.
Beijing has also been fast-tracking infrastructure and industrial projects in recent weeks in a bid to boost investment in a key growth engine, and to boost demand for loans.
Outstanding yuan loans stood at 58.72 trillion yuan at the end of May, an increase of 15.7 percent from a year earlier. Analysts had expected growth of 15.5 percent.