Is it a crime to deface traffic signs?

Of course Banksy defaced it. He drew/painted on a road traffic sign. Just because he's famous and makes pertinent political points doesn't make his 'embellishment' less of an offence than if a regular 'graffiti artist' just marked it with their tag, or some other adornment. If we're going to go down the road that Banksy, or someone else who grabs the public admiration and can command a high price for their art, is free to put their art anywhere at will, then that's a very divisive and elitist path to follow. Some of the graffiti regularly removed by councils is challenging or beautiful but it doesn't save it from removal by pressure sprays.

I don’t think it was a real stop sign either.

There is no dispute that Banksy added the drones to the street sign and by doing so enhanced the value of the sign. If he's enhanced the sign he's not defaced (damaged) it. So he's not committed a crime. Apparently the council have replaced the sign for safety reasons. The Banksy enhanced sign remains (if it's found) council property and is now allegedly worth £500,000 so he's done the council a huge favour.

The Guardian has said it’s value is up to £500,000, so Banksy
must have placed it there.

I thought he made the sign and then put the stencil onto it, I don’t think it was a real road sign that was put there by the Council or Highways Dept.