UPDATE 2-UK shares at more than 1-1/2 year high after Christmas break

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* FTSE 100 on track for best yearly performance in 12 years

* Banks eye best year since 2012

* AstraZeneca up on closing deal with Ionis Pharma

* FTSE 100 up 0.7%, FTSE 250 adds 1.1%
(Updates to close)

Dec 29 (Reuters) - UK shares rose in thin holiday trading on
Wednesday with defensive stocks leading gains against the
backdrop of Britain reporting a record number of COVID-19 cases
and announcing there would be no new pandemic-related curbs this
year.

The blue-chip FTSE 100 gained 0.7% following a
two-day Christmas break and is on track for its best yearly
performance since 2009.

Britain reported a record 129,471 new cases of COVID-19 on
Tuesday, a day after Prime Minister Boris Johnson said he would
not bring in new restrictions this year to limit the spread of
the Omicron coronavirus variant.

Banks added 0.7%, eyeing gains for the fifth
straight week, as shares of HSBC, Barclays,
Standard Chartered and Lloyds Group rose after
the Bank of England increased its interest rate to 0.25% from a
record low of 0.1% for the first time since the pandemic.

"There is some inclination towards the defensive and
financials stocks, as market participants have been bruised by
the volatility of the new (coronavirus) variant," said Kunal
Sawhney, chief executive at Kalkine Group.

Despite a turbulent year and record-low interest rates,
London's banking stocks are eyeing their best year since 2012.
The banking index in UK has gained 22.1% this
year, outperforming the 14.8% rise in FTSE 100.

Defensive sectors such as consumer staples that tend to be
less sensitive to the economic climate boosted the FTSE 100
index. Reckitt Benckiser, Diageo and Unilever
gained between 0.5% and 1.8%.

The domestically focussed mid-cap index advanced
1.1% helped by retail stocks, with Marks and Spencer
gaining 2.0%.

Drugmaker AstraZeneca rose 0.5% after closing an
agreement with Ionis Pharmaceuticals to develop and
commercialise a drug.
(Reporting by Bansari Mayur Kamdar and Amal S in Bengaluru;
Editing by Shounak Dasgupta and Giles Elgood)