The top share index rose slightly by midday on Friday, with banks higher as investors cautiously awaited a Greek debt deal, retailers benefiting from strong UK sales data and M&A talk and miners also gaining.

London's blue chip index <.FTSE> rose 19.36 points, or 0.3 percent at 5,904.74 by 11:59 a.m., but the index was tethered around the 5,900 level as investors awaited confirmation of a bailout payment for Greece.

Banks gained as any deal struck with Greece would remove some uncertainty over their balance sheet exposure to Europe's debt crisis. Royal Bank of Scotland climbed 3.3 percent.

Miners were higher, following a bout of profit-taking over the previous three sessions.

Anglo American rose 1.0 percent, having shed 7.6 percent over the previous five trading days, as the global miner reported a 14 percent rise in full-year operating profit, albeit just shy of the company's own consensus of analyst estimates.

High street retailers also ticked higher, with Marks & Spencer and Next up as much as 1.0 percent as British retail sales soared unexpectedly in January at the fastest pace since April 2011.

This morning's UK retail sales figure was staggeringly strong and has caught the market completely offside. On the back of December's strong retail sales growth, this represents an excellent start to the year, Richard Driver, analyst for Caxton, said.

Investors will also have one eye on the U.S. after the strong macro-economic data in the previous session, with Wall Street pointing to a flat to higher open ahead of January's consumer prices data due to be released at 1:30 p.m., along with real weekly earnings.

Wm Morrison Supermarkets gained 0.3 percent, while M&A talk continued to support Sainsbury .

Britain's third-biggest supermarket group rose 1.1 percent and extended the previous session gains on speculation of a bid from the Qataris, according to various market reports.

With valuations looking cheap -- the FTSE 100 trades on 10.6 times 12-month forward price-to-earnings, compared with its 10-year historical average around 14 times, according to Thomson Reuters data -- and companies sitting on huge cash piles, analysts said M&A could be a theme that dominates through 2012.

Imperial Tobacco rose 0.8 percent with traders citing the Daily Market report that the Lambert & Butler and Golden Virginia cigarette group was the subject of revived bid talk from Japan Tobacco <2914.T>.

Oil explorer Bowleven surged 63.5 percent, as Dragon Oil said it was considering an approach for the firm.

Oil and gas firm Tullow , which had been touted as a possible bidder for Bowleven, was up 2.1 percent.

THIN TRADE

Volumes on the FTSE 100 remained weak at just 43 percent of their average 90-day volume around midday, suggesting investors were cautious over the prospect Greece would secure its second vital bailout.

Greece needs to seal a 130 billion euro (108 billion pound) rescue and avoid bankruptcy, although doubts remained over lenders' demands for tighter supervision of how Athens will implement the deal.

Euro zone sources said national central banks in the currency bloc would exchange holdings of Greek bonds this weekend in the run-up to a private sector debt deal to avoid taking forced losses.

After hefty negotiations, we expect that the Eurogroup will give the green light to allow Greece go ahead with the PSI at the meeting on Monday, Citigroup said.

However, with the open issues regarding debt sustainability and the enforcement of the programme measures, we expect that there will be no approval of the second bailout package on Monday, it added.

Markets, however, retained their optimism with bond yields in other indebted euro zone countries such as Italy and Spain easing slightly, while riskier UK-listed equities such as banks and miners edged.

The cost of insurance on Greek debt, however, continued to suggest that in the longer term Greece could eventually default, albeit in an orderly manner.

Broker comment weighed on some financial stocks, with Ashmore down 2.0 percent as Canaccord downgraded the emerging markets-focused fund manager to hold from buy on valuation grounds, and HSBC cut its recommendation on Ashmore to underweight from neutral.

(Writing by David Brett; Editing by Helen Massy-Beresford)