Bank of Nova Scotia (BNS) has a "relatively narrow path" to outperform amid the tariff-driven uncertain macroeconomic environment, BofA Securities said in a note Monday.

The bank is also facing headwinds related to its exposure to Mexico and Latin America, below-average common equity tier 1 capital compared with peers, and execution risk tied to its turnaround story, BofA said.

BofA also noted that its meetings with the management teams of Canada's biggest banks indicated stalled customer activity as companies wait for clarity on US tariffs and possible potential actions from the new Canadian government following the federal elections to be held on April 28.

"We believe expectations for policy support have helped investor sentiment and driven resiliency in Canadian bank stocks," BofA said. "Management teams also appear to be taking comfort in the potential for policy actions that would temper credit deterioration on the back of tariffs."

BofA downgraded Bank of Nova Scotia's rating to neutral from buy and cut its price objective to 70 Canadian dollars ($48.93) from CA$82.

Bank of Nova Scotia shares fell over 1% in recent Monday trading.

Price: 47.20, Change: -0.53, Percent Change: -1.11