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A permanent ban and an account deletion done by a moderator achieve the same effect: the user can never access the site anymore from that account; a moderator could use either when they really don't want a user on their site anymore.
As a moderator, when to use a permanent ban, and when to use an account deletion?
"Account deletion" does not include "deletion of all posts" here, just deletion of the account.
When you delete a user from the site, you lose all record of that individual. In a situation where a user is being deleted as a result of wrongdoing, the very idea of discarding valuable data (their IP, user agent, email address ...) bodes the question why? In deleting the user, all you are doing is creating a mechanism on which the user can make a fresh start under the same alias/username.
Of course though the idea of deletion versus a permanent ban all boils down to the situation. If a user has severely spammed your site and the tools at your disposal to efficiently delete all their posts is by deleting their account then the obvious solution is to delete their account. Other than that, I see no benefit in deleting key, identifying information.
The bottom line is, if you are considering a permanent ban or account deletion for a user then they must have committed an offence deemed serious. You do not want them on your site. By retaining any and all information surrounding that user, you make it far, far easier for yourself to identify if that user has returned to your site under a different account.
I think your note that it doesn't include deletion of all posts is important. Really, this depends on what the difference is between deletion and permanent suspension. It could be any of a number of things depending on the site and the reasoning would differ for each.
Perhaps suspension doesn't allow posting, but still allows reading posts to which they had access. Perhaps it allows them to be notified of changes to their posts while not allowing additional contributions. Perhaps they have no access at all, but it serves as a place holder to keep them from using that e-mail address again and to serve as something to tie posts to (not all systems can delete a user without removing their posts.)
The main reason to use one over the other would be because it is what makes the most sense in that case, based on the differences between the two options.
The only reason to go for a permanent suspension instead of a deletion that is universal however, is that a permanent suspension can easily be reversed. There are two reasons to permanently suspend someone, the first is that they have done something that guarantees they will never be welcome in the community again. The second is that they have done something that likely means they will never be welcome again, but there may be something they could do in the future to get the account reinstated.
In the later case, it is useful to be able to unsuspend the individual after they prove they have fixed the error of their ways.
I use permanent bans where the offence is so serious that I don't want them on the site any more. This covers things like fraud, hacking, terms and conditions violations, and so on.
Permanent bans are useful because they can be reviewed at any time and repealed if necessary. With an account deletion, you can't do that. In my own experience, account deletions just mean that the user will come back under the same username and cause the same problems all over again (our systems free up any deleted usernames).
In light of that, we don't even have an account deletion function for staff to use as we'd lose our audit trail of user history, moderation actions, and so on when a permanent ban lasting 20+ years does the job.
One unique thing about a permanent ban is, depending on your software, you may not be able to re-register with that same username/email. I don't know how your system treats both of these actions...
Deletion only seems to be an good idea when the account in question is true spam and holds no value. Otherwise, you can still resuscitate the account (perhaps with some difficulty) if you found out that it was an administration error or a misunderstanding (say it was another user who did the 'crime,' although you should never ban unless you know for sure but accidents happen)...
All in all, it comes down to how your system handles it and your site's policies.
Simply put:
Suspension is used when the user name is temporarily unable to participate in the community.
Permanent Ban is used when the user name and the user name reputation is no longer allowed to participate in the community.
Account Deletion is used when the user name any user name reputation is allowed to be recreated in the community under the same user or a new user.
(Note: I emphasized the points in each definition for the distinction.)
